Rebuilding
for the future
PETROFAC LIMITED
Annual report and accounts 2022
Our purpose
We enable our clients to
meet the world’s evolving
energy needs.
We are a leading energy services company
that helps our clients meet the world’s evolving
energy needs. We use our engineering
know-how and our consultancy expertise to
design, build, and operate world-class energy
facilities that are engineered for safety, optimal
efciency, and low emissions.
We operate in a range of markets and work
across the entire asset life cycle – from design
to decommissioning. These competencies,
supported by exible commercial models,
differentiated local delivery, and a technology
neutral approach, set us apart. Core to our
offering is our distinctive, delivery-focused
culture.
SEE OUR BUSINESS MODEL /
Page 14
PETROFAC LIMITED | Annual report and accounts 2022
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW GOVERNANCE
FSC DETAILS TBC
Petrofac Services Limited
117 Jermyn Street
London SW1Y 6HH
United Kingdom
Tel: +44 20 7811 4900
www.petrofac.com
STRATEGIC REPORT
01 Highlights 2022
02 Petrofac at a glance
04 Chair’s statement
06 Executive review
08 Strategy in action: Delivery
10 Strategy in action: Growth
12 Strategy in action: Expansion
14 Our business model
15 Why invest in Petrofac?
16 Market outlook
20 Stakeholder engagement
24 Strategic framework
26 Key performance indicators
28 Environmental, Social and
Governance
37 Task Force on Climate-related
Financial Disclosures
68 Segmental overview
76 Risk management
78 Principal risks and uncertainties
88 Financial review
94 Viability statement
GOVERNANCE
97 Chair’s introduction
99 Board of Directors
101 Group Executive Committee
102 Corporate governance report
111 Nominations Committee report
114 Audit Committee report
123 Compliance and Ethics
Committee report
125 Directors’ remuneration report
152 Directors’ statements
FINANCIAL STATEMENTS
153 Group financial statements
154 Independent auditor’s report
166 Consolidated income statement
167 Consolidated statement of
comprehensive income
168 Consolidated balance sheet
169 Consolidated statement
of cash flows
170 Consolidated statement
of changes in equity
171 Notes to the consolidated
financial statements
235 Appendices
241 Company financial statements
242 Company income statement
242 Company statement of
comprehensive income
243 Company balance sheet
244 Company statement of
cash flows
245 Company statement
of changes in equity
246 Notes to the Company
financial statements
263 Glossary
265 Shareholder information
For the latest investor news, visit our website /
petrofac.com/investors
1. Business performance before separately disclosed items. This measures underlying
business performance.
2. Business performance earnings before interest, tax, depreciation and amortisation
(EBITDA) is calculated as business performance operating profit, including the share
of net profit of associates and joint ventures, adjusted to add back charges for
depreciation and amortisation (see A3 in Appendix A to the consolidated financial
statements).
3. Reported earnings before interest, tax, depreciation and amortisation (EBITDA) is
calculated as reported operating profit, including the share of net profit of associates
and joint ventures, adjusted to add back charges for depreciation and amortisation
(see A14 in Appendix A to the consolidated financial statements).
4. Business performance earnings before interest and tax (EBIT) is calculated as
business performance operating profit, including the share of net profit of associates
and joint ventures (see A4 in Appendix A of the condensed consolidated financial
statements).
5. Reported earnings before interest and tax (EBIT) is calculated as reported operating
profit, including the share of net profit of associates and joint ventures (see A15 in
Appendix A of the condensed consolidated financial statements).
6. Attributable to Petrofac Limited shareholders, as reported in the consolidated
income statement.
7. Free cash flow is defined as net cash flows from operating activities, plus net cash
flows from investing activities, less interest paid and the repayment of finance lease
principal plus amount received/paid from/to non-controlling interest (see A7 in
Appendix A of the condensed consolidated financial statements).
8. Backlog consists of: the estimated revenue attributable to the uncompleted portion
of Engineering & Construction operating segment contracts; and, for Asset
Solutions, the estimated revenue attributable to the lesser of the remaining term of
the contract and five years. The Group uses this key performance indicator as a
measure of the visibility of future revenue.
9. The prior year numbers are restated as detailed in note 2.9 to the consolidated
financial statements.
Highlights 2022
Revenue
US$2,591 million
2021 (restated)
9
| US$3,038 million
Business performance net prot/
(loss)
1,6
US$(284) million
2021 (restated)
9
| US$3 million
Business performance EBIT
1,4
US$(205) million
2021 (restated)
9
| US$(12) million
Reported EBITDA
3
US$(138) million
2021 (restated)
9
| US$(86) million
Free cash ow
7
US$(188) million
2021 | US$(281) million
Reported EBIT
5
US$(212) million
2021 (restated)
9
| US$(189) million
Net debt
US$349 million
2021 | US$144 million
Backlog
8
US$3.4 billion
2021 | US$4.0 billion
Business performance EBITDA
1,2
US$(126) million
2021 (restated)
9
| US$56 million
CDP rating
B
2021 | B
Reported net prot/(loss)
6
US$(310) million
2021 (restated)
9
| US$(245) million
In-country value spend
32%
2021 | 54%
PETROFAC LIMITED | Annual report and accounts 2022
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C_GEN_PageL2Highlights 2022
STRATEGIC REPORT
FIND OUT MORE AT /
petrofac.com
SEE OUR STRATEGY /
Page 24
SEE OUR ESG REPORT /
Page 28
SEE OUR GOVERNANCE
REPORT / Page 97
SEE OUR STAKEHOLDER
ENGAGEMENT / Page 20
Our vision
To be the preferred
services partner to the
energy industry.
Our purpose
We enable our clients
to meet the world’s
evolving energy needs.
Wherever our clients are
on their energy journey
and whatever market
they operate in, Petrofac
has the expertise,
capabilities and
experience to support
them across the entire
asset life cycle.
Design
Build
Operate
Train
Decommission
We believe how we
do business is just as
important as what we
do. Our sustainability
strategy sets out our
ESG goals, aligned
to our purpose and
business model.
Environmental
Minimise our
environmental impact
Social
Inform, educate
and engage
Governance
Embed integrity,
transparency and trust
Our values govern
how we operate and
underpin our purpose.
They are superseded
only by our unyielding
commitment to safety
and ethical behaviour.
Driven
Agile
Respectful
Open
All these elements
align to create
long-term
value for our
stakeholders
Shareholders
Employees
Clients
Suppliers
Communities
Governments,
regulators and
industry bodies
Petrofac at a glance
Our performance is
driven by our strategic
priorities:
Best-in-class
delivery
Return to growth
Superior returns
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Petrofac at a glance
1. Business performance before separately disclosed items. This
measures underlying business performance.
2. Attributable to Petrofac Limited shareholders, as reported in the
consolidated income statement.
3. The prior year numbers are restated as detailed in note 2.9 to
the consolidated financial statements.
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Engineering & Construction
Revenue US$1,311m
2021 (restated)
3
| US$1,952m
Business performance EBIT
1
US$(299)m
2021 (restated)
3
| US$(62)m
Reported EBIT US$(300)m
2021 (restated)
3
| US$(67)m
Net profit/(loss)
1,2
US$(274)m
2021 (restated)
3
| US$(24)m
Employees 3,400
(as at 31 December 2022)
% of revenue
FIND OUT MORE / Page 69
The Engineering & Construction (E&C) division
delivers onshore and offshore engineering,
procurement, construction, installation and
commissioning services. Lump-sum turnkey
is the predominant commercial model used,
but we also offer our clients the exibility of
other models. The division has more than
40 years’ track record in designing and
building major energy infrastructure projects.
Asset Solutions
Revenue US$1,158m
2021 | US $1,111m
Business performance EBIT
1
US$60m
2021 | US$74m
Reported EBIT US$57m
2021 | US$(63)m
Net profit/(loss)
1,2
US$50m
2021 | US$86m
Employees 4,000
(as at 31 December 2022)
% of revenue
FIND OUT MORE / Page 73
The Asset Solutions division manages and
maintains client operations, both onshore
and offshore, delivers small to medium scale
EPC projects and provides concept, feasibility
and front-end engineering design (FEED)
services. The division is also home to market-
leading well engineering, decommissioning
and training capabilities. The majority of AS’
services are executed on a reimbursable basis,
but we are responsive to clients’ preferred
commercial models to deliver our expertise.
Integrated Energy Services
Revenue US$137m
2021 | US$50m
Business performance EBIT
1
US$58m
2021 | US$(6)m
Reported EBIT US$71m
2021 (restated)
3
| US$(43)m
Net profit/(loss)
1,2
US$53m
2021 | US$(5)m
Employees 250
(as at 31 December 2022)
% of revenue
FIND OUT MORE / Page 75
Integrated Energy Services (IES) is Petrofac’s
upstream oil and gas business. Our interest
in the Production Sharing Contract (PSC) for
Block PM304 Malaysia’s offshore Cendor eld
is the sole asset in the portfolio.
A sustainable mindset
At Petrofac, we believe that how we
do business is just as important as
what we do.
Our business model and our ESG agenda
are completely aligned.
Environmental – ensuring that Petrofac
is able to minimise its own environmental
impact, while supporting our clients in
achieving their lower carbon ambitions.
Social – promoting safe local delivery
of our projects and services, drawing on
ethical supply chains to create in-country
value, address local skills gaps, and build
a diverse and inclusive workforce.
Governance – underpinning everything
we do with clear, consistent standards
of ethical behaviour, bound by rigorous
compliance and governance.
FIND OUT MORE AT / petrofac.com
Environmental
Social
Governance
50%
45% 5%
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Delivering
on our strategic focus
RENÉ MÉDORI
Chair
2022 was another challenging year for Petrofac, and from
the outset, I would like to thank all our stakeholders for their
patience. The fact is, further unrecovered cost overruns in the
legacy portfolio, adverse commercial settlements, and cost
increases on the Thai Oil Clean Fuels joint venture contract
continued to impact the business, while growth opportunities
did not materialise as quickly as had been widely anticipated.
Under these circumstances, the Group worked to capitalise
on the progress made in 2021, namely the resolution of
the SFO investigation and the capital raise and renancing.
Client relationships were restored, particularly in the United
Arab Emirates, our execution capability was strengthened by
embedding a single technical services organisation (1tec), a
strong pipeline of bidding opportunities was pursued, and the
excellent performance of Asset Solutions and IES continued.
Interactions with clients and all market analysis reviewed by the
Board points to a much needed return to investment in our key
geographies. As this happens, Petrofac is well-positioned for
growth.
Benefiting from a strong reputation, bolstered
by a clear ESG positioning
In meetings with stakeholders, I am continually reassured of
Petrofac’s enduring reputation for delivery. The message I
hear from the market, time and time again, is that clients value
Petrofac and they look forward to the Company playing a
signicant role as the sector evolves.
In these meetings, I am also reminded of the importance of the
environmental, social and governance (ESG) agenda. The ability
to demonstrate strong ESG credentials is a key strategic asset
in today’s world. Many of our most important stakeholders
tell me that they are impressed by Petrofac’s ESG-related
achievements.
Chair’s statement
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Chair’s statement
This includes the progress made in embedding a comprehensive
compliance and governance regime, but extends also to our
emphasis on employee wellbeing, diversity and inclusion, and
our Net Zero commitments. A key strength is our local delivery
model, which remains a clear differentiator for Petrofac, enabling
us to capture efciencies and reduce execution risks, while also
making a strong and tangible contribution to the economies in
which we operate.
Of course, energy transition also represents a signicant
business opportunity. In particular, the Board is encouraged by
the scale of the opportunities in offshore wind. One customer
alone has plans to install a further 40 gigawatts of grid capacity
to support offshore wind power generation. Alongside a proven
track record, new initiatives, like our collaboration with Hitachi,
enable Petrofac to deliver a compelling service in this rapidly
growing sector.
Maintaining a strong and stable Board
In November 2022, we announced that Sami Iskander would be
leaving Petrofac to pursue other interests. Once again, I would
like to thank Sami for his invaluable contribution since joining the
Board. As well as overseeing the resolution of the historical SFO
investigation and concluding the renancing programme, Sami
reshaped the business and put it rmly on a path to sustainable
growth. As everyone who worked with him will agree, he also
brought unwavering energy and decisive leadership at a critical
time in Petrofac’s history.
In terms of the Board itself, I would also like to thank Andrea
Abt and George Pierson for their support and valued counsel
during a particularly turbulent time. They both served for two
consecutive three-year terms and stepped down at the 2022
AGM. This left us with a smaller, more focused Board, which is
commensurate with the scale of the Group and the geographies
in which it operates.
One of the Board priorities for 2022 had been to prepare for my
own succession. In order to provide continuity, my term as Chair
had already been extended. However, with a new Group Chief
Executive joining in April 2023, the recommendation was that I
should remain in place for at least another year. As Tareq Kawash
continues to lead Petrofac on its path towards growth, he will
need to be able to rely on a stable and supportive Board, and
this will be one of our key priorities in 2023. Following the 2024
Annual General Meeting, we will address long-term succession,
not just for me but for other long-standing Directors.
Providing clarity on our strategic priorities
As we planned for the transition to a new Group Chief Executive,
the Board made it clear that the existing strategy must remain
in place. Signicant progress has been made in closing out the
mature, pandemic-affected legacy contracts and positioning
Petrofac for growth, so now is the time to capitalise on the work
already achieved. Our priorities for 2023 are therefore clear, it will
be about building on Sami’s work, winning new business and
getting Petrofac back to executing at sector-leading margins.
I would like to thank the entire Petrofac team for their continued
commitment to the Group, their response to the ongoing
challenges, and their contribution to the many achievements
of 2022.
RENÉ MÉDORI
Chair
27 April 2023
Transitioning to a new Group Chief Executive
In our search for a suitable successor to Sami Iskander,
we were fortunate to appoint Tareq Kawash, who joined
the Board on 1 April 2023 from McDermott International,
where he previously ran their sizeable onshore and offshore
business across Europe, the Middle East and North Africa.
With deep knowledge of our core geographies, Tareq has
impeccable credentials in winning and delivering EPC
contracts.
He also has pre-existing relationships with many of our key
clients, plus several others. Having known and admired
Petrofac for many years, he is clearly excited by the
opportunity of leading the Group back to growth.
We expect that, given Tareq’s strong business development
credentials, he will be fully focused on further strengthening
our client relationships and landing growth opportunities
within our core markets and geographies.
Tareq will be supported by a strong, well-established
Executive team, which is indicative of the deep pool of talent
across Petrofac.
The Board welcomes the fresh perspectives that Tareq
will bring, and we look forward to working with him
closely as we take the business forward over the
coming years.
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In 2022, strong performance in both Asset Solutions and IES
was offset by adverse commercial settlements and further
unrecovered cost overruns on our legacy E&C portfolio.
Combined with delays in the award of new contracts, 2022
made for a disappointing year.
As we enter 2023, however, a mood of optimism has returned.
We have substantially completed a number of projects in our
legacy E&C portfolio, E&C bidding activity continues to be at
record levels, Asset Solutions is delivering healthy growth and, in
the new energies sector, Petrofac is well-placed to benet from
signicant investment in offshore wind.
Managing our remaining legacy challenges
As 2022 unfolded, the sector’s understanding of the severity
of the challenges induced by the pandemic became clearer.
Within our own mature portfolio, the pandemic-related issues
were compounded by cost increases on the Thai Oil Clean Fuels
contract.
By the end of the year, seven of the active lump-sum contracts
had been completed or substantially completed, while ve of the
remaining eight are scheduled to complete in 2023 and we are
closely monitoring any risks.
Going forward, the work done in reshaping the business, and
comprehensively embedding a single technical services organisation
(1tec) throughout the Group, will enable us to deliver future projects
to a consistently high standard.
Executive review
• While the 2022 results were disappointing, Petrofac is
optimistic about a return to growth
• We made good progress in closing-out much of our
mature Engineering & Construction (E&C) project
portfolio heavily impacted by pandemic delays
• The market fundamentals are strong, with prospects
of an increase in investment across our core markets
• Asset Solutions and Integrated Energy Services (IES)
again performed well, with several important contract
extensions, supported by breakthrough activity in
decommissioning
• Bidding activity in both E&C and Asset Solutions
is at record levels, extending to the Middle East,
North Africa, India, Europe, and beyond
Bidding at scale and with discipline across
several geographies
An important point to emphasise is the extent of our business
development activity in E&C.
Bidding activity is high, with Petrofac vying for several major
contracts in the Middle East and North Africa, Asia, and Europe.
E&C is well positioned on a number of near-term prospects,
with US$1.5 billion of opportunities where we were at preferred
bidder stage, and a further US$3.0 billion of bids submitted.
Including these, E&C had visibility of approximately US$40 billion
scheduled for award by June 2024, of which US$23 billion is
scheduled for award during 2023. At a Group level, the pipeline
to June 2024 is US$51 billion.
Of course, we continued to maintain our bidding discipline,
determined to pursue a quality backlog that supports sector-
leading margins. We also began to enhance E&C bids with low-
carbon offerings, enabling clients to reduce the carbon intensity
of their assets, both during the build phase and throughout their
operating life, while also highlighting our leadership credentials
across this all-important dimension.
In the renewable energy sector, E&C is well-positioned to
capitalise on material short-term opportunities in offshore wind.
As in our traditional sectors, in wind we always seek to take
an innovative, problem-solving approach. A great example is
our partnership with Hitachi Energy, which we entered into in
June 2022. The initial aim was to help a key client, TenneT, to
accelerate the preparatory works in its current 2GW programme,
and pave the way for an eventual 40GW of offshore wind grid
capacity.
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Executive review
This partnership ultimately led to an early works agreement
between TenneT, Hitachi and Petrofac, which was further
enhanced by the award of Petrofac’s largest ever framework
agreement - a multi-year deal worth approximately €13 billion
at the end March 2023. We also hope that the partnership with
Hitachi will help other clients to accelerate their respective wind
farm developments.
Continuing to drive growth in Asset Solutions
Asset Solutions delivered another robust performance, with
record order intake, continued growth prospects, and a
healthy margin.
Beyond several signicant contract awards and extensions in
our traditional operations, maintenance, and well engineering,
we also made a number of breakthroughs in late-life asset
management and decommissioning. This was evidenced by
signicant new awards in Australia and the Gulf of Mexico.
Expertise gained in the mature and highly regulated UK market,
including the integration of services across the asset life cycle, is
a clear differentiator. It means we have a unique ability to provide
a one-stop shop for full decommissioning services, including the
ability to take full responsibility from a regulatory perspective.
As energy transition continues to gather pace, and more oil and
gas assets move towards decommissioning, this is another of
the ways we can help to solve problems and create value
for clients.
Across the new energy sectors, 2022 was another busy year.
We continued to secure early-stage awards and enter into
strategic alliances with technology providers for pioneering
projects in areas such as hydrogen, carbon capture, utilisation
and storage and waste-to-fuel.
Message from
Sami Iskander
While cognisant of the disappointing 2022 results,
as I look back on my two years leading Petrofac, I feel
extremely proud of everything the team has achieved.
We effectively rebalanced and reshaped the business,
regained a reputation for business probity, secured a
critical renancing programme, and revived several
key client relationships. My personal thanks go out to
everyone who contributed.
I would also like to thank our shareholders and other
investors for retaining their condence in the Group.
Over recent years, there has been much disappointing
news for them to contend with, albeit balanced by
evidence of tangible progress and the expectation of a
return to growth.
I now ask the entire Petrofac team to put their full support
behind my successor, Tareq Kawash, as he leads the
Group through the next chapter. I truly believe this is a
special company, with a strong positioning and a unique
in-country delivery model. As a team, we have done
much to resolve the challenges in the legacy portfolio,
instil an intrinsic and authentic ESG culture, and position
Petrofac for sustainable growth. The process of rebuilding
the backlog is well underway, laying the foundations
for a return to protability, positive free cash ow and
continued recovery and growth thereafter.
I believe that, with a strong outlook and a commitment to
continue our bidding discipline, Petrofac will deliver on its
ambition of returning to US$4 billion-US$5 billion annual
revenue, with at least 20% coming from new energies,
and delivering sector-leading margins.
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Strategy in action
Delivery
Best-in-class
delivery
Link to strategy |
SEE OUR STRATEGY / Page 24
Petrofac has a strong record
for project execution, focused
on delivering effective and
safe solutions
Across every metric – whether it be productivity,
safety, diversity, or environmental performance –
we aim to be the industry leaders.
A Petrofac differentiator is our local delivery model.
As well as creating in-country value, this is one of
the ways we minimise costs, avoid complexity,
manage risk, and overcome global skills shortages.
The Ain Tsila Development Project in Algeria typies
our approach.
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Strategy in action: Delivery
Active in Algeria since 1997, we have delivered some
of the country’s most important energy assets. The
Ain Tsila Development Project, valued at around US$1
billion, is one of the most strategically signicant – both
for Petrofac and for Algeria itself.
Located around 1,100 km south-east of Algiers, the
Ain Tsila eld will produce gas, LPG and condensate
for the local market and for export. The scope involves
engineering, procurement and construction of a Central
Processing Facility, an offsite export pipeline and
gathering system, and includes commissioning, start-up
and performance testing.
During construction, 40,000 cubic metres of concrete
were poured, 7,000 tonnes of steel erected, 2,000 km of
cable pulled, and 410 km of pipelines laid.
As with any Petrofac project, local employment is a
big consideration, and we have invested considerably
in upskilling the local workforce. We operate the Hassi
Messaoud Construction Skills Training Centre, with the
capacity to deliver skills-based training to 400 delegates
annually, and a new ve-year development plan is set to
deliver additional modules, third-party certication, and
management training for supervisors.
Despite the disruptions caused by the pandemic, the
project is on track for completion in the rst half of 2023.
What is most rewarding about the Ain
Tsila project is our contribution to the
local community and the wider Algerian
economy. Almost 90% of the 4,500
workforce is Algerian, and most live
nearby. Together, we are building a new
strategic asset for Algeria – a state-of-
the-art energy facility that will produce
more than 10 million cubic metres of gas
for the domestic and export markets.”
HUSSEIN SAWALHA
Project Director
Ain Tsila
US$1.0 billion
project
90%
of the 4,500 workforce is Algerian
10.3 million
cubic metres of gas a day
1,600 tonnes
of LPG a day
1,800 tonnes
of condensate a day
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Strategy in action continued
Growth
Link to strategy |
SEE OUR STRATEGY / Page 25
We regard the energy transition
as a strategic growth opportunity
for Petrofac.
With many transferable skills and capabilities, and a
rapidly evolving track record in new energies, we are
well-positioned to help our clients meet the world’s
evolving energy needs.
In the near term, the most material opportunity is in
offshore wind, where capacity is expected to grow
by more than 50% between 2022 and 2027¹. Our
involvement dates back to 2009, when we rst started
to provide people, maintenance, and support services to
BorWin Alpha, the world’s rst offshore HVDC converter
station. Since then, we have designed and constructed
several of the most impressive offshore wind facilities,
and managed some of the most challenging.
1. International Energy Agency, Renewable energy forecasts, https://www.iea.org/reports/
renewables-2022/renewable-electricity
Return to
growth
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Strategy in action: Growth
Located over 27 kilometres off the coast of Angus at its
nearest point, the Seagreen Wind Farm development,
a JV partnership between SSE Renewables and
TotalEnergies, is Scotland’s biggest, and is set to provide
energy for two-thirds of the country’s homes when it
reaches full capacity.
We have provided the engineering, procurement,
construction and installation of the High Voltage
Alternating Current (HVAC) offshore substation platform
and the onshore substation at Tealing in Scotland,
including all civil work and major equipment.
The platform’s six-legged jacket, weighing in at 5,100
tonnes, is engineered to withstand the extreme weather
conditions in the UK North Sea. Installation progressed
to plan, using low-hammer energy and acoustic
deterrent devices to minimise any environmental
impacts. With the topside added safely in 2022, it is
scheduled to be fully operational in 2023.
As demand for wind energy increases, we are helping
to frame the future for offshore assets. Our new
partnership with Hitachi Energy enables the efcient
integration of offshore assets with the onshore
infrastructure and, through our collaboration with
Seawind Technologies, we are active in the emerging
market for oating wind farm concepts.
The skills we’ve developed in building
hydrocarbon assets are directly
transferrable to a project like this.
Similarly, our knowledge of what it takes
to operate and maintain an offshore
asset helps us to focus on operability,
sustainability, and longevity, as well as
constructability. Of course, there are
different nuances and a different risk
prole, but our technical, engineering
and safety management skills are
absolutely applicable.”
VIPUL SAWE
Senior Project Director
Seagreen
5,100
tonnes
jacket
4,800 tonnes
topside
Up to 58 metres
of water – the world's deepest fixed-bottom
wind farm
1,075MW
of electricity generated
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Strategy in action continued
Expansion
Link to strategy |
SEE OUR STRATEGY / Page 25
As the energy transition picks
up pace, and existing assets
in mature basins reach the
end of their operational life,
the end-of-life management
and decommissioning market
is expected to grow signicantly.
Indeed, a recent report suggests that, by 2027,
the offshore decommissioning market will exceed
US$8 billion annually*.
Petrofac is in a good position to benet. We are the
only tier-one contractor with the in-house capability
to manage all well and asset decommissioning phases.
And, with a one-team, integrated approach, we can
simplify stakeholder management and contractual
administration – offering clients a one-stop shop
and a safe, predictable, cost-effective service.
Having honed our approach in one of the world’s
most mature and highly regulated basins,
namely the North Sea, our track record and expertise
can be exported worldwide and deployed in other
regions that will ultimately follow the same trajectory.
It is therefore one of our routes to selective geographic
expansion – especially when it is combined with other
Petrofac differentiators, such as our local delivery ethos
– as demonstrated by recent contract wins in Australia
and the Gulf of Mexico.
Superior
returns
* Marketresearch.com: https://www.marketresearch.com/MarketsandMarkets-v3719/
Offshore-Decommissioning-Service-Plugging-Abandonment-14809120/
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Strategy in action: Expansion
The Northern Endeavour FPSO has a complicated history.
Moored between the Laminaria and Corallina oil elds
550 kilometres northwest of Darwin, the 274-metre-long
vessel was originally installed in the mid-1990s and
once processed 170,000 barrels of oil a day. However,
in 2019, a regulatory inspection found it to be in a
degraded state and insisted it was shut down, citing an
immediate threat to health and safety. With the operator
falling into liquidation, the Australian government sought
a partner to manage the necessary decommissioning
and selected Petrofac.
Given the state of the vessel it is a complex undertaking,
involving meticulous planning, plenty of stakeholder
engagement, and close collaboration with the regulators
to get consent for each step. Although the global
Petrofac organisation is providing expert support, the
project team is located in Perth, and is working closely
with several locally based supply chain partners. The
rst major milestone came in October 2022 when,
following an intensive programme of due diligence and
physical inspections, we ofcially took over operatorship
of the Northern Endeavour.
The contract award could be worth up to AUD$325
million (US$236 million). It is the rst step in an
Australian decommissioning industry that will ultimately
be worth several billion dollars.
This is a high-prole, landmark project,
both for Petrofac and the Australian
energy industry, which marks the start
of the country’s decommissioning sector.
A critical element of our approach is
the upskilling of the local workforce.
Wherever we work, we aim to be a
local company, generating local jobs,
developing local skills, and nurturing the
local supply chain.”
JOSIE PHILIPS
Regional Director, Australia
Northern
Endeavour
274
m
long vessel
550km
offshore
9
subsea wells to be suspended
Decommissioning
and disconnection
from subsea infrastructure
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Our resources What we do
Value created
in 2022
The right people and culture
As a service business, it is our
people, their capabilities and
skills that set us apart from our
competitors. Our values and
behaviours underpin our ways
of working. We are committed to
developing our people, identifying
and nurturing future leaders,
and enabling everyone within
the business to perform to
their true potential and make
a real difference.
Strong and trusted
relationships
Our deep understanding of our
sector allows us to develop and
deliver solutions that solve our
clients’ challenges.
Our knowledge and skills
We develop deep knowledge of
the many businesses in our supply
chain; we know when and how to
call on their respective strengths
to deliver for our clients.
Making a positive contribution
We aim to make a positive
contribution to the societies
in which we operate. We are
committed to ethical conduct,
put an emphasis on safety,
care deeply about creating
in-country value and, to minimise
our environmental impact,
have set a Net Zero target for
carbon emissions.
Design
Engineering expertise
is at the heart of
everything we do. We
provide a full suite of
engineering services
from conceptual and
feasibility studies and
Front-End Engineering
and Design (FEED) to
detailed design.
Build
We build some of the
world’s largest energy
facilities, leveraging
our differentiated
engineering,
procurement,
construction and
commissioning skills to
safely deliver projects
on time and on budget.
We offer clients a range
of exible commercial
delivery models, from
lump-sum turnkey to
fully reimbursable.
Operate
We safely operate
and maintain energy
facilities on behalf of
our clients through
a variety of services,
from the provision
of labour to fully
managed solutions.
The deployment of
digital technologies
is at the heart of
our offering as we
focus on maximising
productivity, efciency
and extending eld
life.
Train
We develop local
workforces through
a range of services,
from assessing
capability needs
and creating tailored
training courses to
designing, building
and managing state-
of-the-art training
facilities. Our unique
offering is supported
by industry-leading
software solutions.
Decommission
We decommission
energy assets. As
infrastructure nears
end of life, we
integrate our services
to extend production,
minimise operating
and abandonment
expenditure,
ahead of safely
decommissioning it.
Across the energy life cycle
Oil and gas
processing facilities
Storage and
pipelines
Refining and
petrochemicals
Offshore
wind
Offshore production
Client value
Beneting from certainty of cost
and delivery, utilising commercial
models that meet their needs.
In-country value
Developing local skills and
capabilities, beneting local
development and stimulating
productivity in local economies.
Social performance
32%
spent on local goods and services
Tax spend
US$170m
Employee value
86%
Employee engagement score
7,950
employees (3% decrease)
Emissions reduction
Emission reductions and
low-carbon offering on
tenders, enabling clients
to meet their targets.
Our business model
PETROFAC LIMITED | Annual report and accounts 2022
14
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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Our business model
Why invest in Petrofac?
Best-in-class
Exceptional track record
of safe, reliable, and
innovative execution built
over several decades –
enhanced by simplifying
the organisation, and
creating an optimal
structure, including 1tec,
a single technical services
and assurance function.
SEE OUR BUSINESS MODEL
/ Page 14
200+
More than 200 major
projects executed
across the world.
Well-positioned
in resilient
markets with
attractive growth
opportunities
SEE OUR MARKET
OUTLOOK / Page 16
US$51bn
Group pipeline scheduled
to be awarded before
mid-2024
A local delivery
model that
creates value for
all stakeholders
SEE OUR ESG REPORT /
Page 28
32%
In-country value spend
As demonstrated by the
scale of bidding activity,
our core markets are
returning to growth and
actively investing in their
energy assets – while
our decarbonisation and
new energies offerings
continue to build
momentum.
We employ local people,
nurture local supply
chains, and develop local
talent and capabilities
– helping us to build
client relationships, bid
on challenging projects,
reduce costs, protect
margins, and de-risk
delivery.
Engineering
expertise, expertly
delivered across
the life cycle of
energy assets
42years
Our engineering and
construction experts have
been turning complex
concepts into reality
A trusted partner
with long-standing
client, supplier
and partner
relationships
SEE OUR STAKEHOLDERS
ENGAGEMENT / Page 20
Top 3
EPC contractor in
the Middle East
SEE OUR SEGMENTAL
OVERVIEW / Page 68
Providing integrated
services that span
the entire asset life
cycle – enabling us to
embed and extend client
relationships, deliver
additional value to all
our projects, and better
withstand the cycles of
the energy sector.
A diverse portfolio of
long-established clients,
particularly NOCs in the
MENA region – which
enjoy some of the
lowest marginal costs of
production in the world
and resilient spending
on energy infrastructure
through the cycle.
A problem-
solving culture
that harnesses
innovation and
technology to
nd new ways
to add value
SEE OUR TENNET/HITACHI
CASE STUDY / Page 72
Partnership
A signicant new
partnership with
Hitachi feeding
through to awards
With a client-focused
mindset, we always look
for new ways to meet
clients’ needs – including
tailored nancial models,
applying the right
technologies, and working
with a range of vendors.
A commitment
to bidding
discipline
SEE OUR FINANCIAL
REVIEW / Page 88
Sector-
leading
margins
Achievable in
the medium term
Historically, we have a
strong reputation for
operating with nancial
integrity and efciency
and generating sector-
leading margins –
and now have a clear
pathway back to
growth and the delivery
of superior returns.
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Why invest in Petrofac?
Market outlook
future
growth
Well-positioned for
PETROFAC LIMITED | Annual report and accounts 2022
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Market outlook
2020 STEPS 2050
1
APS 2050
2
NZE 2050
3
27% 15% 8%
3%
29%
27%
17%
8%
23%
20%
15%
8%
4%
2%
1%
12%
29%
51%
70%
5%
6%
9%
12%
2022 2024
486 546
80
92
132
131
37
1
5
7
5
9
14
20
21
13
35
882
845
748
41
78
962
48
69
2023
534
98
122
60
2025
530
101
122
2023 2024 2025
48
60
69
2023 2024 2025
14
35 35
2023 2024 2025
5
20
41
2023 2024 2025
9
13
21
As the world adjusts to the new challenges and opportunities
brought about by an unprecedented energy crisis and macro-
economic slowdown, countries worldwide are seeking to nd the
best long-term balance between energy security, affordability, and
sustainability. Across each of these three dimensions, Petrofac has
an extensive track record in helping clients to access additional
energy sources, extend the productive life of, achieve lower costs
across their assets’ life cycle, and decarbonise
their operations.
In the long term
The long-term fundamentals for Petrofac – and the industry –
remain strong. Whatever the pace of the energy transition, all
forms of energy will be required for several decades (see chart 1).
Absolute energy demand is expected to remain robust, and oil
and gas will continue to be a signicant proportion of the global
energy mix, even as far as 2050.
Hydrocarbons:
Engineering & Construction: We are active in the most robust
hydrocarbon markets within the upstream, renery and
petrochemical sectors, and, following a decade of under-
investment, expect to see growth in spending, particularly in the
MENA region. (see chart 2)
Asset Solutions: As clients seek to maximise the value from
their assets and subsequently plan for an exit from their operations
in mature basins, the prospects for operational expenditure
remain strong.
New energies: At the same time there will be an acceleration
of investment in new energies, with clean energy investment
expected to have exceeded US$1.4 trillion in 2022, including
strong growth in offshore wind, carbon capture usage and storage
(CCUS), hydrogen, and waste-to-value projects. In each of these
areas, Petrofac has strong credentials and a rapidly developing
track record, and we expect to see exponential growth. This
Chart 1. Total primary energy
supply by fuel and scenario
Coal Oil Natural gas Traditional use of bio mass
Renewables Other Total Energy Supply EU
1. STEPS Stated Policies Scenario
2. APS Announced Pledges Scenario
3. NZE Net Zero Emissions by 2050
Chart 3. New energy capex forecasts indicate exponential growth
across our focus sectors
Chart 2. Oil and gas investments US$bn
Upstream Refinery Petchem Off Wind*
CCUS H2 W2X
Source: Rystad, GlobalData and Petrofac analysis
Source: Wind Europe
Offshore wind |
capex spend ($bn)
Source: Carbonomics, Goldman Sachs
Waste-to-value |
capex spend ($bn)
Source: Carbonomics, Goldman Sachs
Carbon Capture & Storage |
capex spend ($bn)
Source: Carbonomics, Goldman Sachs
Hydrogen |
capex spend ($bn)
PETROFAC LIMITED | Annual report and accounts 2022
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C_GEN Section
2021 2022 2024
352
417
456
72
87
118
17%
17%
18%
20%
2023
464
102
20%
2025
464
119
500 150 250 350 450400300200100 500 550
36
39
41
40
47
44
45
62
100
90
80
70
60
50
40
30
20
10
0
Market outlook continued
is underpinned by our partnership with Hitachi to support the
offshore HVAC and HVDC market (see chart 3).
Given the climate commitments of respective governments,
emissions reductions will continue to be a key priority in all
markets. There will therefore be considerable pressure on
energy companies to reduce the carbon intensity of their existing
operations and to shift their focus to lower-intensity fuels. At
Petrofac, we are well-equipped to assist clients in improving
their emissions performance, as we continue to make progress
towards our own 2030 Net Zero commitment.
In the short to medium term
To satisfy immediate demand, compensate for a decade of
under-investment, and adjust to the changing geopolitical climate,
considerable spend is forecast in production infrastructure,
particularly in Petrofac’s core MENA markets.
The investment case is made stronger by sustained higher oil
prices, which are expected to remain elevated due to ongoing
supply shortages and the changing geopolitical climate and
a return to pre-pandemic activity levels. With many of the
International Oil Companies focusing on decarbonising, and
allocating an increasing proportion of investments to new
energies, much of the supply gap is expected to be met by the
National Oil Companies, a high proportion of which are in our
core MENA markets, which are set for a sustained period of
production growth.
By virtue of our geographic focus, Petrofac is well-positioned
to benet from this increased investment. Given the low costs
of production and anticipated commitments to boost upstream
investment and capacity expansion, it is expected that the onus
will increasingly fall on the MENA region to continue to meet the
global demand for hydrocarbons – as indicated by the UAE’s
plans to increase its production capacity by one million barrels
per day by 2025 (see charts 4 and 5).
Chart 4. Global upstream capex forecasts
US$bn MENA region to grow at 10% CAGR 2021-
2025
Global (excl. MENA) MENA MENA % of total
Source: Rystad
Whatever the pace of the
energy transition, all forms
of energy will be required
for several decades.”
Chart 5. Global liquid cost curve
Brent breakeven price ($/bbl)
Total recoverable liquid resources (billion bbl)
Onshore Middle East
Deepwater
NA tight liquids
Extra heavy oil
RoW onshore
Shelf
Russia onshore
Oil sands
Source: Rystad Energy UCube
Numbers shown represent the average
breakeven price
PETROFAC LIMITED | Annual report and accounts 2022
18
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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20212020 2022
1
1
86
4
4
12
5
8
2
Petrofac has an extensive track record and a leading position in
MENA, where investment is expected to grow to US$120 billion or
roughly 20% of global spend by 2025. In 2022, we were named
one of the region’s top three EPC contractors by Oil & Gas Middle
East magazine – an accolade which recognises our local delivery
model and high proportion of in-country value, which enhances
our understanding of local markets, de-risks delivery, and
generates sector-leading margins.
Projections in our core regions:
UAE: ADNOC is expecting to invest US$127 billion over the
period 2022-2026 on growth projects, including plans to raise oil
production capacity by 1 million barrels per day by 2030.
Algeria: is aiming to double its gas production destined for
exportation to reach 100 billion cubic meters.
Oman: intends to become one of the largest green hydrogen
producers and exporters globally, targeting production of 1 million
tonnes annually by 2030.
Growth in new energy projects
Meanwhile, as the energy transition gathers pace, we have
continued to build on our new energy credentials. In addition to
our strong position in offshore wind, we have secured a series of
contracts across CCUS, hydrogen and waste-to-value, with early-
stage works and emerging technologies providing momentum in
anticipation of subsequent public support funding for these energy
transition innovations (IEA, 2022). We have also created alliances
with several technology providers and developers across these
solutions, as well as the Hitachi Energy partnership in offshore
wind, to best position the Group to grow in these sectors.
Growth in new energy projects
Number of contracts in execution in the year
CCUS
Hydrogen
Waste-to-value
Offshore wind
New energies’ pipeline
1
CCUS 28%
Hydrogen 16%
Offshore wind 49%
Waste-to-value 6%
US$11billion
1 The bidding pipeline includes opportunities scheduled for award by June 2024.
In the near term, offshore wind continues to represent the most
material opportunity in new energies, and we expect to pursue
several more EPC opportunities in 2023. The medium-term
outlook is further strengthened given the new found emphasis
on energy security, and the growing enthusiasm for wind power
both in Europe and North America. An indication of the potential
is TenneT’s commitment to deliver 40GW of wind grid capacity in
the German and Dutch North Sea, and its plans to invest US$32
billion in a substantial new grid-link build. For further information,
please see the case study on page 72.
A significant addressable market and a busy
bidding environment
In the medium term, the addressable market for Petrofac is
expected to exceed US$127 billion per annum, comprising US$75
billion in upstream oil and gas, rening and petrochemicals, US$32
billion in new energies, and US$20 billion in operating expenditure.
Against this background, our ambition is to deliver Group annual
revenue of US$4 billion to US$5 billion, including at least US$1
billion from new energies.
Of course, uncertainty remains regarding the geopolitical climate,
the economic environment, inationary pressures, and supply
chain constraints. However, with healthy bidding volumes, and
a Group pipeline of US$51 billion scheduled for award by June
2024, of which US$31 billion in 2023 is scheduled to be awarded
to the industry, we are well-positioned for recovery, and expect to
deliver sustained growth over the medium term.
PETROFAC LIMITED | Annual report and accounts 2022
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Stakeholder engagement
Petrofac is focused on driving long-term
sustainable performance for the benefit
ofallour stakeholders.
We believe that, by understanding what matters
to our stakeholders, we are better able to secure
long-term success for the business. We place
a strong emphasis on proactive, transparent,
and open engagement with all key stakeholder
groups, which in turn promotes mutually
beneficial relationships and value.
Given the challenges of recent years, disciplined
and timely stakeholder engagement has been
key to navigating a volatile business environment
and pursuing our strategic goals. Similarly, as we
return to growth and help our clients meet the
world’s evolving energy needs, we need to retain
the support and confidence of all stakeholder
groups.
In this section of the report, we identify these
groups and their key interests, outline why they
are so important, and detail how we engage with
them, and factor their interests and concerns
into our decision-making. Further details on
Board stakeholder engagement can be found
inour Governance report on page 106.
Our shareholders and other
investors
FURTHER LINKS / FINANCIAL REVIEW / Page 88
Why they are important
Our shareholders and other investors are of critical importance to Petrofac and delivering an attractive
return is a core priority for the Board. Shareholder views are considered during strategy discussions to
enable the Board to provide information that will drive informed investment decisions. Continued access
to capital is vital to the long-term performance of our business and we work to ensure that our
shareholders and investors have a strong understanding of our strategy, performance, ambitions
and culture.
How we create value for them
We run a sustainable business, with strong fundamentals, which is focused on achieving long-term
growth and delivering differentiated returns.
THEIR KEY INTERESTS KEY ENGAGEMENT CHANNELS OUTCOME OF ENGAGEMENT
• Financial performance
andreturns
• Application of our business
model andimplementation
ofour strategy
• Governance matters,
includingBoard
effectiveness, succession,
and remuneration
• Sustainability and ESG
performance
• Strong leadership
• Reputation
• Our Annual General Meeting,
where shareholders can ask
questions
• Regular meetings and
roadshows held with key
investors to discuss strategy,
operational and financial
performance
• Management presentations
provided to institutional and
credit investors following
publication of our results,
which are streamed live via a
webcast and are available on
our website
• The Chair and Remuneration
Committee Chair engage with
investors on matters relating
to governance, succession,
and remuneration
• Regular updates provided to
the Board on investor
sentiment
• The Board reflected on the
ongoing external impacts on
the Group and consequently
no dividend was
recommended
• Continued engagement was
undertaken throughout the
year, with over 170 meetings
held with key shareholders,
investors and analysts
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Stakeholder engagement
Our employees
FURTHER LINKS / ESG / Page 55
FURTHER LINKS / STRATEGY IN ACTION /
Pages 8-13
Why they are important
Our greatest asset is our experienced, diverse and dedicated workforce. As a service business, it is our
people, their attitude, capabilities and skills, who set us apart from our competitors. With a distinct,
delivery-focused culture, we need employees to have a positive, problem-solving approach. Our
employees are the driving force behind our Group and we are committed to ensuring we have safe
andeffective working environments, which enable everyone to perform to their true potential.
How we create value for them
We are committed to being a good employer, with an engaged and diverse workforce. We provide all
employees with opportunities for personal and professional development. We also have a strong and
demonstrable commitment to keeping people safe and looking out for their wellbeing.
THEIR KEY INTERESTS KEY ENGAGEMENT CHANNELS OUTCOME OF ENGAGEMENT
• Career and development
opportunities
• Diversity and inclusion
matters
• Health, safety, and wellbeing
• Fair pay and reward
• Job security
• Implementation of the
strategic and energy
transition agenda and the
impact of digitalisation
• Two-way engagement
• Regular interaction between
the Board and management
during and after Board
meetings, focusing on
performance and strategy
• The Employee Workforce
Forum
• Employee network groups
• Regular townhalls to update
employees on performance,
strategy and priorities
• Talent management and
succession plan discussions
• Board sessions with
graduates, future talent and
senior management
• Annual PetroVoices employee
engagement survey
• Internal engagement
campaigns to reinforce
important topics such as
health and safety, compliance,
diversity and inclusion, mental
health awareness, and Net
Zero initiatives
• Increased participation rate in
our PetroVoices survey and
strong engagement scores
• An election process for the
Petrofac Workforce Forum
with nominations received to
fill the 12 positions
• Sessions held with graduates,
middle and senior
management during the
Board visit to Sharjah, UAE
• Two new employee network
groups established, one for
young professionals and one
for older employees
• New reward and recognition
initiatives, including enhanced
healthcare and life
insurancebenefits
• Achieved a reduction in the
number and frequency of
workplace injuries, with the
lost time incident rates
unchanged year-on-year
• Further development of our
mentoring programmes
across the Group
Why they are important
With strong client relationships, we are better able to identify and compete for new business and growth
opportunities. By taking a client-centric approach, and seeking their feedback, we are better able to
develop innovative solutions that create value and improve their overall experience. Drawing on
demonstrable levels of satisfaction among existing clients, we are equipped to expand into
adjacentsectors and new geographies.
How we create value for them
Deliver a positive client experience through superior, innovative EPC and service solutions, while
designing, building, and operating safe, high-quality, highly operable energy assets and infrastructure.
THEIR KEY INTERESTS KEY ENGAGEMENT CHANNELS OUTCOME OF ENGAGEMENT
• Operational delivery
• Implementation of the
strategic agenda and
evidence of a rigorous and
integrated ESG strategy
• Ethical credentials
• Health and safety processes
and initiatives
• High levels of in-country value
• Meetings with key clients,
involving Executive Directors,
members of senior
management and our project
delivery teams
• Regular participation at
industry events
• Our website and social media
platforms
• Regular participation at trade
shows and conferences
• Materiality review surveys
andin-depth interviews
• New contracts and contract
extensions signed during the
year with several longstanding
clients, including ADNOC, bp,
EnQuest, Shell, Sonatrach, and
Tullow Oil
• Continued development of
long-term client relationships,
especially among national oil
companies
• Successfully executed new
energy’s opportunities
• Development of a range of
flexible commercial delivery
models
• Continued deployment of new
digital technologies, that allow
site audits and equipment
inspections to be conducted
virtually
• Maintained our client-centric
ethos to harness innovation and
digital technology to find new
ways to add value
Our clients
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Stakeholder engagement continued
Local communities
FURTHER LINKS / ESG / Page 59FURTHER LINKS / STRATEGY IN ACTION / Pages 8-13
Why they are important
Strong supplier relationships ensure sustainable, high-quality delivery for the benefit of all stakeholders,
especially at a time when there are considerable supply chain constraints. By understanding the respective
strengths of many suppliers and vendors, we can specify the most appropriate solution and technology
for each client. By nurturing local supply chains, we are able to reduce delivery risk and freight miles.
How we create value for them
With a commitment to local delivery, we help suppliers to develop their capabilities, enhance their
delivery, and conform to global ESG expectations, helping several businessesbecome significant
international enterprises.
THEIR KEY INTERESTS KEY ENGAGEMENT CHANNELS OUTCOME OF ENGAGEMENT
• Implementation of the
strategic agenda
• Business model application
• Ethical and HSE credentials
• Transparent tendering
process
• Reasonable terms
andconditions
• Sustainable engagement
• Emissions targets
• Attendance at industry events
and trade shows
• Engagement between supply
chain partners and our
Compliance function to
ensure understanding and
compliance with our Code
ofConduct
• Through our website and
social media platforms
• An annual assessment of our
extended supply chain to
identify and address potential
human rights issues
• Supplier roadshows at the
start of major projects to
understand their credentials
and identify those with an
appetite for growth
• Contractor safety forums
organised to share HSE best
practice initiatives
• An in-country value spend
ofUS$345 million
• More than 100 partners
attended or first Contractors’
Safety Forum in Algeria
• Following the migration to anew
due diligence platform, we
enhanced the way our suppliers
and business partners are
monitored, enabling more
in-depth due diligence reviews
to be conducted
• Continued to work
collaboratively with our supply
chain to address potential
human rights risks and ensure
that everyone working on our
projects is treated with fairness,
dignity, and respect
• Developed our supplier portal,
allowing improved collaboration
• We remain a member of the UK
Prompt Payment Code
• We worked with our supply
chain to assist in setting their
emissions targets to support
their lower carbon ambitions
Why they are important
Our local delivery model is a key differentiator for Petrofac and we want local communities to benefit from
our presence. We actively support local communities to address local issues responsibly and manage the
social and environmental impacts of our business, which we believe will bring long-term sustainability to
the communities where we operate. Our aim is to be a force for good in the communities we serve and, in
doing so, create value for all our stakeholders.
How we create value for them
Wherever Petrofac operates, we are committed to creating shared value, by engaging with local
communities, investing in local supply chains, employing local people, and stimulating local economies,
while minimising any harm to the natural environment.
THEIR KEY INTERESTS KEY ENGAGEMENT CHANNELS OUTCOME OF ENGAGEMENT
• Investments in local
supplychains
• Supporting infrastructure
improvement programmes
• Human rights matters
• Local employment
opportunities
• The impact of activities on the
wider community
• STEM education initiatives
• Ad hoc face-to-face meetings
with local communities
• Vocational development
programmes with our local
partners
• Public consultations
• Human Rights audits at
project sites and in
neighbouring communities
• We invested more than
US$145,000 in community
engagement and social
performance initiatives
• We created a new
Sustainability Manager role,
for which one of the key focus
areas is social investment
• Several social programmes
are in place which are
focused on building capacity
with the local supply chain,
creating local jobs, and
supporting vocational training
and apprenticeships and
scholarship programmes
• Our in-country value
programmes are continually
reviewed and extended to
grow sustainable economies
and create value for the
Group as well as local
communities
• We conducted an in-depth
human rights audit at our
Duqm project in Oman, which
involved an impact
assessment on the local
community
Our suppliers
PETROFAC LIMITED | Annual report and accounts 2022
22
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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C_GEN Section
Governments, regulators
and industry bodies
FURTHER LINKS / ESG / Page 30
We believe that open
engagement is central
to how we do business
to ensure the effective
delivery of our strategy.”
An example where the Board actively
considered stakeholders when making
key decisions.
Rightsizing the business
Given the financial and operational
challenges of 2022, it was necessary for
management to continue to take actions to
control costs, protect the Group’s balance
sheet and maintain liquidity.
Despite the many initiatives taken in 2021,
additional cost reductions were necessary
this year, including further redundancies in
some parts of the Group.
The Board gave its full support to
management with respect to the package of
measures that was necessary to rightsize the
business, while also considering the impact
on the Group’s employees.
Through updates received from
management, the Board remains satisfied
that the actions taken were in line with the
Group’s culture and values and, importantly,
that redundancies were made with respect
and sensitivity, with the aim of mitigating the
impact on those employees affected.
In its support of the rightsizing actions,
the Board had regard to the interests of
employees and to the needs of the Group’s
other stakeholders. The Board’s decision
to support management was based on its
responsibility for safeguarding the future
success of the Company.
Why they are important
We are subject to the laws and regulations of many governments and regulators across the world.
Wework closely with our regulators to help shape our industry, agreeing commitments and continually
reporting our performance against these. As geopolitical situations evolve and the energy transition
gathers pace, government policies will inevitably have an impact on our sector and consequently, we are
committed to engaging constructively on a range of issues, both with government bodies and regulators
and through industry associations to achieve the best outcomes for customers and the environment.
How we create value for them
The global economy runs on energy, and we are involved in building and operating significant energy assets
and infrastructure and helping clients to meet the world’s evolving energy needs. Aside from our direct
investments in local economies, we contribute to public finances via the taxes we pay. Our local delivery
model also sees us investing in local supply chains, employing local people, and stimulating local economies.
THEIR KEY INTERESTS KEY ENGAGEMENT CHANNELS OUTCOME OF ENGAGEMENT
• Health and safety matters
• Performance against
regulatory targets
• Governance and compliance
matters
• The energy transition agenda
• Taxation
• The UN Climate Change
Conference (COP27)
• Through the UK regulator
North Sea Transition Authority
(formerly Oiland Gas
Authority)
• Through our representation
with trade bodies, such as
OEUK, the EIC, CBI and
Renewable UK
• Participation in round table
and industry consultations
onissues that are relevant
toour business, e.g. carbon
capture, usage and storage
(CCUS) business models
• Responding to numerous
consultations on issues
affecting the industry
• Attendance and participation
in industry events
• We engaged directly and
actively with state bodies,
aswell as national oil
companies, in almost all
ofour territories
• We participated at COP27 in
Egypt
• We have developed a range of
training facilities, designed to
increase capacity and skills in
the local economy in several
countries, and we are
participating in national skills
training initiatives in Algeria
and Mozambique
• John Pearson, Chief
Operating Officer of our New
Energy Services business,
joined the Board of OEUK
• Our total tax spend reached
US$170 million
PETROFAC LIMITED | Annual report and accounts 2022
23
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C_GEN Section
Strategic framework
We are pursuing three clear
strategic priorities to best position
the Group for the long term and
secure medium-term growth.
With a strong position in the
most robust hydrocarbon markets,
a strong track record in an ever-
expanding offshore wind market
and a rapidly evolving footprint in
other new energies, we can enable
our clients to meet the world’s
evolving energy needs.
Best-in-class delivery
SEE OUR STRATEGY IN ACTION / Page 8
• Reshape the organisation
• Global capability, local execution
• Strategic partnerships/
technologyneutral
• Digitally enabled
Overview
We build on our traditional strengths,
introducing new efficiencies and bringing greater
consistency to the way we operate the business
– with a single technical services organisation
(1tec) providing delivery capability, support
and assurance and enabling us to operate with
optimal efficiency.
A Petrofac differentiator is our local delivery
model, helping us bid on challenging projects,
keep costs to a minimum, reduce risk, and build
stronger relationships with local stakeholders.
To build on this, we ensure that our local teams
reflect the clients they serve and deliver the
highest levels of in-country value (ICV) in our
industry.
We invest in digitalisation and in our technical
expertise to maximise productivity and provide
optimal solutions to our clients. Wedevelop
strategic partnerships to help us achieve the
best outcome for our clients. Being technology
neutral means we can use our extensive
experience to specify the best solution for each
client, through partnerships with a wide range of
technology suppliers.
2022 Performance
• Embedded 1tec across the Group
• Improved on an already strong HSE
performance with embedding the new
HSE strategy
• Significant new partnership with Hitachi
Energy in offshore wind
• Challenges experienced in executing
legacy pandemic-affected E&C contracts
• In-country value action plans are now
implemented in all our key geographies
2023 Priorities
• Extend partnerships to bring the
capabilities to meet our clients’ needs
• Expand our in-country specialisms,
through additional country managers
• Recruit, train and retain quality personnel
for the projects ahead
• Execute remaining E&C legacy portfolio
contracts on time and on budget
Link to KPIs
Employee numbers
7,950
LTI rate (per 200,000 work hours)
0.018
Offshore wind pipeline
US$5 billion
In-country value spend
32%
PETROFAC LIMITED | Annual report and accounts 2022
24
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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C_GEN Section
Strategic framework
Return to growth
SEE OUR STRATEGY IN ACTION / Page 10
• Rebuild backlog
• Selective growth in new geographies
• Leverage capabilities in new energies
• Customer-centric approach
Overview
As the world adjusts to the changing geopolitical
and economic circumstances, spending on the oil
and gas infrastructure in our core MENA markets
is expected to increase significantly and promises
a sustained period of growth.
Our clear priority in Engineering & Construction is
to capitalise on this recovery in our core markets.
In new energies, our expertise and track record in
offshore wind, along with an expanding market,
provides an additional tangible and immediate
opportunity for growth. It also acts as an anchor
for the development of three other clearly defined
segments in which we have strong credentials
– namely carbon capture usage and storage
(CCUS), hydrogen and waste-to-value.
Meanwhile, Asset Solutions continues to deliver
significant revenue growth, and is expected
to continue this trajectory in 2023, supported
by a strong order intake in 2022 and a healthy
pipeline of opportunities across new and existing
geographies. Integrated decommissioning is one
of the areas in which we are uniquely placed.
As a services business, our clients sit at the heart
of everything we do – and, as they work through
their respective energy security, affordability, and
sustainability challenges, we can help them to
access additional energy sources, secure lower
costs of production, while decarbonising their
operations.
2022 Performance
• Reinstated on ADNOC’s commercial
directories
• 80% renewal rate and a growing backlog
for Asset Solutions contracts
• Established a one-stop shop for
integrated decommissioning
• Delay to backlog growth resulting
principally from delays in clients reaching
final investment decisions in 2022
2023 Priorities
• Grow our Engineering & Construction
backlog from the healthy pipeline in
core markets and geographies
• Continue backlog growth and
geographical expansion in Asset
Solutions
• Expand capabilities and track record
in new energies
Link to KPIs
Revenue
US$2.6 billion
New awards
US$1.9 billion
Book-to-bill
0.7x
Superior returns
SEE OUR STRATEGY IN ACTION / Page 12
• Integrated ESG delivery
• Enhanced risk management framework
• Deliver premium margins, consistently
• Capital light business model
• Maintain strong balance sheet
Overview
Petrofac has traditionally had a strong
reputation for operating with financial efficiency
and generating sector-leading margins.
The headwinds of recent years dented our
operational and financial performance. We now
have a clear pathway back to future growth and
the delivery of superior returns.
Our best-in-class delivery and our local market
model will enable us to keep costs down, whereas
1tec will provide a strong risk management
and an independent assurance function. Our
ESG commitment brings additional rigour to
the way we manage the business, unlocks
growth opportunities, and helps us meet client
expectations.
We are confident that we will deliver our
medium-term ambition of US$4 billion-US$5
billion in revenue (more than 20% of which from
new energies), with sector-leading EBIT margins
and a strong balance sheet with net cash.
2022 Performance
• Strong bidding discipline maintained,
in both project selection and pricing
• Effective overhead cost and liquidity
management throughout the year
• Challenges experienced in delivering
differentiated margins on legacy Covid-
affected E&C contracts
2023 Priorities
• Execute remaining projects on time
and on budget
• Maintain bidding, cost and liquidity
discipline
• Execute new projects with the 1tec model,
to ensure consistent delivery and
differentiated margins
Link to KPIs
Business performance EBIT
US$(205) million
Liquidity
US$506 million
CDP rating
B
PETROFAC LIMITED | Annual report and accounts 2022
25
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C_GEN Section
Key performance indicators
Measuring our progress.
Petrofac sets key
performance targets and
assesses performance
against these benchmarks
on a regular basis.
2022 US$2,591m
2021 (restated)
3
US$3,038m
2020 US$4,081m
Revenue
(15)%
Description – Measures the level of revenue of the business.
Measurement – Revenue for the year as reported in the
consolidated income statement.
Description – EBIT means earnings before interest and
tax and provides a measure of the operating profitability of the
business.
Measurement – EBIT is calculated as operating profit, including
the share of net profit from associates and joint ventures (see A4 in
Appendix A of the consolidated financial statements).
US$(205)m 2022
2022
2020 US$88m
Business performance EBIT
1
(1608)%
Reported EBIT
Description – EBIT means earnings before interest and
tax and provides a measure of the operating profitability of the
business.
Measurement – EBIT is calculated as reported operating profit,
including the share of net profit from associates and joint ventures
(see A15 in Appendix A of the consolidated financial statements).
US$(212)m 2022
US$(189)m 2021 (restated)
3
US$(155)m 2020
(12)%
R
Part of the 2022 Executive Directors’ Remuneration
Description – EBITDA means earnings before interest, tax,
depreciation and amortisation.
Measurement – EBITDA is calculated as operating profit,
including the share of net profit of associates and joint ventures,
adjusted to add back charges for depreciation and amortisation
(see A4 in Appendix A of the consolidated financial statements).
US$(126)m
2020 US$211m
Business performance EBITDA
1
(325)%
R
Description – EBITDA means earnings before interest, tax,
depreciation and amortisation.
Measurement – EBITDA is calculated as reported operating
profit, including the share of net profit of associates and joint
ventures, adjusted to add back charges for depreciation and
amortisation (see A14 in Appendix A of the consolidated
financialstatements).
Reported EBITDA
US$(138)m 2022
2021 (restated)
3
2020 US$114m
(60)%
(15)%
2022 US$3.4bn
2021 (restated)
3
US$4.0bn
2020 US$5.0bn
Backlog
Description – Provides a measure of the visibility of future
revenues.
Measurement – Backlog consists of: the estimated revenue
attributable to the uncompleted portion of Engineering &
Construction operating segment contracts; and, with regard to
Asset Solutions, the estimated revenue attributable to the lesser
of the remaining term of the contract and five years.
US$(12)m
2021 (restated)
3
US$56m
2021 (restated)
3
US$(86)m
PETROFAC LIMITED | Annual report and accounts 2022
26
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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C_GEN Section
Key performance indicators
Description – EPS provides a measure of net profitability of
the Group taking into account changes in the capital structure,
for example, the issuance of additional share capital.
Measurement – Business performance diluted EPS attributable
to Petrofac Limited shareholders, as reported in the consolidated
income statement and calculated in accordance with note 9 of the
consolidated financial statements.
Business performance diluted earnings per share
(EPS)
1,2,3
(55.2)¢/s 2022
2021 0.8¢/s
2020
14.8¢/s
(7,000)%
Free cash flow
Description – These KPIs measure both the absolute amount
of cash generated from operations and the conversion of EBITDA
to cash.
Measurement – Free cash flow, as per appendix A7 of the
consolidated financial statements. Cash conversion is calculated
as cash generated from operations divided by business
performance EBITDA.
US$(188)m 2022
US$(281)m 2021
US$(123)m 2020
R
2020 36%
Cash conversion
R
(3)%
2022 7,950
2021 8,200
2020 9,400
Employee numbers
Description – Provides an indication of the Group’s service
capacity.
Measurement – For the purposes of the Annual Report,
employee numbers include contract staff and the Group’s share
of joint venture employees.
1. Business performance before separately disclosed items. This measurement is shown by Petrofac
as a means of measuring underlying business performance.
2. Attributable to Petrofac Limited shareholders, as reported in the consolidated income statement.
3. The prior year numbers are restated as detailed in note 2.9 to the consolidated financial statements.
2022 0.018
2021 0.018
2020 0.013
Lost time injury
Description – Provides measures of the safety performance
of the Group, including partners and subcontractors.
Measurement – Lost time injury (LTI) and recordable incident
(RI) frequency rates are measured on the basis of reported LTI
and RI statistics for all Petrofac companies, subcontractors and
partners, expressed as a frequency rate per 200,000 work hours.
We aim continually to improve our safety record, but our target for
these measures is zero.
2022 0.094
2021 0.091
2020 0.065
Recordable incident frequency rates
R
R
33%
2022 0%
2021 0%
PETROFAC LIMITED | Annual report and accounts 2022
27
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C_GEN Section
Environmental, Social and Governance
Living up to
our sustainability
commitments
Alignment between our business model
and our ESG agenda
We see the energy transition as a strategic opportunity.
The creation of in-country value is central to our local delivery
model, and our best-in-class delivery is characterised by
uncompromising commitments to ethical behaviour, safety,
employee wellbeing, diversity, and inclusion.
Ultimately, our purpose is to help clients to meet the world’s
evolving energy needs – and this means our purpose is
intrinsically linked with overcoming the global challenge of climate
change and advancing decarbonisation of the energy sector.
Decarbonisation is at the very centre
of what we do
In 2022, the energy transition and energy security were high on
the agenda for all our clients, and the way we work reects that
fact. In our everyday operations, we are reducing the carbon
intensity of existing oil and gas facilities; designing and building
a new generation of lower-intensity energy facilities; and creating
a more sustainable future, fuelled by an abundant supply of
new energies.
Operationalising our ESG commitments
With 25% of their incentives tied to it, ESG has the attention of
our Executive team members, and we are making demonstrable
progress on many fronts.
In 2022, for instance, we further strengthened our Health, Safety,
Environment and Quality teams with several more senior-level
appointments. We established a new Emissions Dashboard to
drive awareness of our performance at the project, business unit,
and corporate level. As a matter of routine, we also supplement
our bids with a range of low-carbon options, covering the build of
a new asset as well as its subsequent operations. We continued
to reinforce the importance of ethical behaviour to our people
and have invested considerably in our related teams, systems
and processes. These are just a few examples from many – the
details of which you can read in this report.
Creating value for our people
and our communities
Another source of pride within Petrofac is the way we do business.
We have a local delivery model that enriches communities,
creating new jobs, and bringing new wealth. We are a people-
based business. We care deeply about personal and professional
development, we have a culture that embraces diversity, we are
a leader in protecting the safety and wellbeing of our people
and, with a client-centric ethos, we nurture innovation and value
creative problem solving.
These are all reasons to take pride in
Petrofac, to embrace the future we are
creating, and to celebrate the incredible
things we are achieving together.”
PETROFAC LIMITED | Annual report and accounts 2022
28
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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C_GEN Section
Dening our
material issues
Understanding what matters
most to our stakeholders
To understand what matters to
them most, we formally engage
with representatives from various
stakeholder groups (including
clients, suppliers, investors, NGOs,
policymakers, employees, and
our supply chain) and align our
Environmental, Social and Governance
(ESG) priorities to the material issues
identied.
In 2022, we undertook a
comprehensive materiality review,
canvassing views from over 30
representatives from external
stakeholder groups, complemented
by several more focused one-on-
one discussions. We also consulted
over 100 employees from across the
business through various webinars,
engagement events, and surveys to
understand their views and priorities.
Based on this engagement, we
maintain a materiality matrix, which is
used to inform our ESG programmes
and monitor emerging issues. It is also
used as a strategic business tool to
apply a sustainability lens to business
risk, opportunity, and enterprise risk
management.
The 2022 engagement demonstrated
that, irrespective of the changing
geopolitical situation and its impact
on energy prices and energy security,
climate resilience and decarbonisation
(Net Zero) remain high on the agenda.
In addition, safety and sector-leading
ethical compliance continue to be
embedded in our culture and priorities
for our stakeholders. Meanwhile, given
increased economic pressures, there
is an added emphasis on labour rights
protection throughout our supply
chain, as well as employee welfare
and wellbeing.
The ESG issues that matter
most to our stakeholders
Material issues |
Environmental aspects
1. Tackling climate change
(Net Zero)
2. Climate resilience
(energy transition)
3. Biodiversity protection
4. Circularity and waste
management
5. Water management
Social aspects
6. Asset integrity and incident
management
7. Worker health, safety & wellbeing
8. In-country value
9. Employee attraction,
development and retention
10. Diversity and inclusion
11. ‘Just’ transition
12. Human rights
13. Community engagement
Governance aspects
14. Ethical behaviour and
compliance
15. Revenue transparency
16. Responsible governance
17. Grievance management
Importance to Petrofac
Importance to external stakeholders
Somewhat material Material High materiality
Somewhat material Material High materiality
1
2
3
4
5
6
7
8
9
10
11
13
12
14
15
16
17
PETROFAC LIMITED | Annual report and accounts 2022
29
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29
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C_GEN Section
Environmental, Social and Governance continued
An ESG framework
focused on
shared value
Delivering on our sustainability strategy
In our everyday business, our approach to sustainability has a high prole.
Through an active programme of internal and external communications,
we continue to make our people and our stakeholders aware of our ESG goals,
and show how our purpose is aligned to our sustainability ambitions.
Our sustainability strategy is structured around the three ESG pillars:
• Environmental – ensuring that Petrofac minimises its own environmental
impact, while supporting our clients in achieving their lower carbon ambitions
• Social – promoting safe, local delivery of our projects and services, drawing
on ethical supply chains, building a diverse workforce, and helping to address
the skills gaps that will support a just transition
• Governance – underpinning everything we do with clear, consistent
standards of ethical behaviour, bound by rigorous compliance and governance
We maintain a dashboard to track our performance against each dimension.
Our strategic goals
Links to the
UN Sustainable
Development Goals
Environmental
Minimise our
environmental
impact
Social
Inform, educate
and engage
Governance
Embed integrity,
transparency
and trust
PETROFAC LIMITED | Annual report and accounts 2022
30
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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Aligning with the UN Sustainable Development Goals
Our sustainability strategy seeks to address the material issues identied from our stakeholder engagement, and the ESG programmes are aligned with the seven UN
Sustainable Development Goals that we believe are most relevant to Petrofac’s business.
• We are also a signatory of the UN Global Compact, and this report serves as our Communication on Progress on the implementation of its ten principles. The report is also
prepared in accordance with the Global Reporting Initiative, the Sustainability Accounting Standards Board, and the recommendations of the Task Force on Climate-
related Financial Disclosures.
¹ See page 29 for list of material issues
² See subsequent sections for specific metrics associated with each target
Addressing climate risk
and resilience
1,2,3, 11 Net Zero by 2030 (scope
1 and 2 emissions)
Our Flare Reduction Taskforce delivered a step-change in emissions performance and successfully
reduced our aring intensity by 49%.
SEE / Page 33
Circularity, waste and
water management
4,5 Circular economy
adopted by all sites
We have made good progress phasing out the majority of non-essential single-use plastics from all
our ofces and are progressing phase-out programmes at our project sites.
SEE / Page 36
Sector-leading
health and safety
6,7 Zero harm We saw a reduction in the number and frequency of work place injuries, as well as a decrease in the
severity. We are also pleased to report there were no work place fatalities.
SEE / Page 50
Enhancing diversity
and inclusion
9, 10 30% women in
leadership roles by 2025
We made modest increases in the proportion of women in senior management to 26%, and our
female and LGBTQ+ employee network groups won the Equality, Diversity & Inclusion Initiative of
the Year award at the Engineering Construction Industry Training & Development Awards.
SEE / Page 56
Respecting human
rights
12,17 All third parties screened
for human rights
We continued to screen contracted third parties for human rights violations. The number of
companies pre-screened, ahead of any prequalication request, within the E&C business unit, was
1,911 (increased from 1,475 in 2021). Unfortunately, we continue to uncover a small number of
labour rights violations (such as late salary payments) at lower tiers of our supply chain.
SEE / Page 63
Optimising
in-country value
8, 13 Sector-leading
local delivery
In-country value (ICV) action plans are now implemented in all our key geographies focusing on
nationalisation, supply chain capacity building, local purchasing and investment. The proportion of
local goods and services purchased decreased to 32%. The impact of supply chain disruptions on
local capacity and availability, combined with the limited opportunities to procure certain high-tech
equipment in some countries, all impacted our ability to purchase locally.
SEE / Page 60
Embedding ethical values
and behaviours
14 No regulatory
non-compliance
We continued to embed a compliance ethos across the Group, saw improvements in the quality
of Speak Up reports, and have enhanced our processes and controls through the use of our new
cloud-based due diligence platform, operated by Dow Jones.
SEE / Page 65
Enhancing transparency,
governance and disclosure
15, 16 Move beyond
compliance
We have continued to integrate the TCFD recommendations into our existing risk and governance
processes, incorporating good practice recommendations from the Financial Reporting Council.
Our governance practices were recognised by third parties and ranked as ‘leading those of peers’
by MSCI.
SEE / Page 37
STRATEGIC PRIORITIES
MATERIAL
ISSUES¹
OUR TARGETS²
PROGRESS IN 2022 FURTHER
INFORMATION
ON TARGET PROGRESSING TARGET NOT ACHIEVED
PETROFAC LIMITED | Annual report and accounts 2022
31
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31
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Environmental, Social and Governance continued
Environmental
We are committed to reaching
Net Zero¹ in Scope 1 & 2²
emissions by 2030
We phased out single-use
plastics across our permanent
ofces
Our UK ofces switched
more than 90% of supplied
energy contracts to renewable
energy
Gas abatement plans
implemented on PM304 reduce
gas aring by a third
2022 192
2021 188
2020 250
Scope 1 emissions
(direct from owned or controlled sources)
Tonnes of carbon emissions (000 tCO
2
e)
Our performance
2022 5
2021 8
2020 10
Scope 2 emissions
(indirect from purchased energy) 000 tCO
2
e
Number of spills above one barrel
(0 from vandalism)
2022
2021 1
2020 1
0
2022 131
2021 256
2020 116
Greenhouse gas (GHG) intensity IES
000 tCO
2
e per million boe production
2022 0.30
2021 0.30
2020 0.27
GHG intensity E&C/AS
000 tCO
2
e per million work-hours worked
Hydrocarbon spilled volume in barrels
(0 from vandalism)
2022
2021 2
2020 2
0
1. Greenhouse Gas Protocol Standard Corporate Accounting and
Reporting (equity share approach) followed for Scope 1 and 2 emissions
(market based), utilising SANGEA Energy and Emissions Estimating
System and UK Government greenhouse gas (GHG) conversion factors.
2. To calculate GHGi: for IES-total scope (1+2) emissions of IES/net
production in boe and for E&C/Asset Solutions − total scope (1+2)
emissions of (E&C+Asset Solutions)/ million of man-hours worked are
used.
Why it is important
to our business
model and strategy
As an energy services company that
designs, develops and operates large
scale facilities, Petrofac’s business is
inextricably linked to environmental
considerations.
A central consideration is our role in
the global energy transition, including
the requirement from clients to
reduce the carbon intensity of their
existing facilities and operations,
as well as our new energies
business.
Of course, our approach also
extends to mitigating the risk of
environmental incidents, as well
as the environmental performance
of our own operations.
Links to the SDG’s
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Moving towards our Net Zero goals
In 2020, we committed to transition to a lower
carbon business. We aim to reach Net Zero
in our scope 1 and 2 emissions by 2030 and
are promoting and supporting decarbonisation
across our supply chain. Our targets support
the principles of the Paris Climate Agreement
and, as the wider sector moves towards
decarbonisation, they are aligned with our
clients’ ambitions.
Our Net Zero roadmap outlines the approach
being taken by each area of the business.
Broadly, the path to Net Zero emissions
involves two steps:
• First, to decarbonise to organically
lower emissions
• Then, to offset residual emissions
with carbon credits
Our main decarbonisation levers are:
• Switching our energy supply to
renewable power
• Improving our energy efficiencies
• Reducing flaring, venting and fugitive
emissions
• Electrifying our transport
In 2022, we continued our efforts to understand
and quantify the true source and scale of our
scope 3 emissions (see page 35). By building on
this work, we should be in a position in 2023 to
dene related reduction targets.
SCOPE 3
Value chain
(upstream)
3.3 million tCO
2
e (total Scope 3)
Carbon
Management
Planning
Energy efficiency Renewable energy
Value chain
(downstream)
Construction
(7%)
Carbon footprint
14.2 kt CO
2
e
Operations
(90%)
Carbon footprint
177.5 kt CO
2
e
(EPS 11.2 kt,
PM304 166.3 kt)
Administration
(3%)
Carbon footprint
5.2 kt CO
2
e
34.9 million tCO
2
e
SCOPE 1 SCOPE 2 SC OPE 3
Action on Scope 3
Transport electrification
Emissions reduction
Action on Scope 3
PE TROFAC’S ACTIVI TIE S
Production operations
The Flare Reduction Taskforce was established to
identify decarbonisation opportunities related to gas re-injection
(sequestration and storage), condensate recovery, gas shut-
off, electrication, and gas export. The Taskforce worked in
partnership with the Block PM304 team in Malaysia to deliver a
49% reduction in emissions intensity.
Supply chain
Low-carbon supply chain elements
were codied into our vendor
management systems to facilitate
low-carbon procurement and
project delivery.
Digitalisation
We matured our Scope 3 programme,
extending our assessment across
all applicable categories of the GHG
protocol including the energy footprint
of the facilities we design, build and
operate and use this to identify low-
carbon solutions for our clients.
Decarbonisation guidance rolled out
The Net Zero Steering Group developed detailed ‘How to’ guidance for
the business which was rolled out across each Business Unit.
Emissions management tool
Net Zero action plans were put in place for all our main ofces,
focusing on switching energy supply to renewable energy (where
available), advancing initiatives to promote more efcient use of energy
and water, and introducing electric vehicle charging points. Our UK
ofces switched more than 90% of supplied energy contracts to
renewable energy.
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We implemented a cloud-based Emissions Dashboard, which
captures and displays all of our scope 1, scope 2 and scope 3
emissions data at the corporate, business unit, and project level.
Available to all employees via any online or mobile device, this
helps us to increase awareness of our performance and adds to
the urgency of our Net Zero journey.
Meanwhile we made reasonable progress in identifying and
implementing the many local initiatives that will enable us to
achieve our overall decarbonisation targets. Accountability for
delivering on these initiatives is delegated to each business
unit and the work is coordinated by their respective Carbon
Management Teams. To assist them, a programme of
Decarbonisation Guidance was launched in 2022 via a series of
webcasts.
Strengthening our environmental
management team
As a demonstration of our environmental commitment, and our
determination to achieve our Net Zero goals, we appointed a
new Head of Environment & Sustainability. A key leader in our
strengthened HSE team, she has a background in environmental
science, and previously held senior environmental roles at a
global provider of engineering, project and construction services
to the mining and metallurgical sectors – so she brings a valuable
external perspective to our environmental programmes.
How we manage our environmental performance
Our goal is to manage the environmental risks of our projects
and operations effectively, optimise our use of resources, and
minimise our environmental impacts.
In terms of emissions, to support our 2030 Net Zero target,
we are committed to an interim target of a 3% year-on-year
reduction in GHG emission intensity from 2021 to 2023.
Environmental, Social and Governance continued
Each year, we participate in the Carbon Disclosure Project
(CDP), and in 2022 we continued to enhance our climate change
programme and again achieved a CDP rating of B. This is
within the upper band of CDP rating for managing and taking
coordinated action on climate-related issues, and demonstrates
that our carbon management system has become more mature,
and is above the average rating of C for our sector.
We calculate our carbon footprint and energy consumption
in accordance with the UK Streamlined Energy and Carbon
Reporting (SECR) regulations, and our data is assured and
veried by an independent AA1000 licensed assurance provider.
Our Waste Management Standard governs our waste practices,
with duty of care as a basic principle. We aim to reduce the
amount of waste we generate and promote a circular economy
by maximising reuse and recycling of materials. Achievements
from 2022 include the phasing out of those single-use plastics
that are within our direct control at all our ofces and progressing
phase-out programmes at several of our project sites.
Reflecting on our 2022 performance
In 2022 our absolute emissions remained broadly the same.
While we made signicant progress in reducing emissions
intensity, this was offset by increases in production to meet the
energy needs of our customers, resulting in little change to our
overall absolute emissions.
In IES, a programme of work on our offshore asset in Malaysia
brought a step-change in emissions performance. Our Flare
Reduction Taskforce in partnership with the Block PM304 Asset’s
Reservoir Management and Operations Teams in Malaysia
successfully reduced emissions intensity by 49% to 131 (166k
tCO
2
e against net production of 1.2Mboe). This was achieved
through a successful ongoing gas shut-off programme, switching
diesel for fuel gas that would otherwise be ared, and operational
optimisations focused on logistics enhancements.
In E&C, a reduction of 23% to 30k tCO
2
e in direct emissions
was achieved (against activity of 101 million work hours).
This was in part due to lower levels of activity combined with
progress delivering our Net Zero plan. It included the roll out
and implementation of decarbonisation guidance, further
energy efciency measures in our ofces, and the progressive
switchover to renewable electricity sources. In addition, we have
rationalised our vehicle eet, reducing the number of vehicles
by 17%, though progress with the transition to electric vehicles
remains challenging in many geographies due to limitations in
charging infrastructure.
In terms of spill performance, we experienced zero reportable
spills. However, during commissioning activity on the Seagreen
Windfarm Offshore Substation Platform in June 2022,11kg
of an electrical insulating gas (Sulphur Hexauoride, SF6)
was accidentally lost to the environment. Standard systems
and procedures were immediately activated and site access
restricted as a precautionary measure. Although the volume of
CO
2
equivalent did not meet the threshold for reporting, SF6 is
a potent GHG and Petrofac documented and shared all lessons
learnt with relevant stakeholders including the UK Health and
Safety Executive and Marine Scotland.
Extending the range of decarbonisation
services we offer to our clients
As well as managing our own environmental performance, we
help our clients to meet the world’s evolving energy needs. This
means that, as part of our everyday activity, we work with them
to reduce the carbon intensity of existing oil and gas facilities,
design and build lower-intensity facilities, and deliver on the
potential of new energies.
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Developments from 2022 include:
• In E&C, our bids are increasingly accompanied by fully-costed
low-carbon options. These show clients how we can
minimise the environmental impact of the construction
process, as well as reducing the carbon intensity of a facility’s
future operations – including electrification, minimised flaring,
prevented fugitive emissions, CCUS deployment, and
optimised operating approaches.
• In Asset Solutions, we enhanced Petrolytics, our AI-powered
analytics platform, to monitor the real-time emissions
performance of any operating asset. Through a web-based
dashboard, this enables us to keep track of a facility’s true
environmental impact, and to recommend and model
performance enhancements – either through planned
maintenance cycles, or by intervening with new modifications.
• Meanwhile, our new energies business continues to gather
momentum, as set out on pages 71 and 74.
Addressing our scope 3 emissions
We recognise that the emissions from our value chain are a
material part of our carbon footprint and, in 2022, we progressed
a scope 3 programme to better understand the related
decarbonisation challenges and opportunities.
To quantify these emissions, we use the Quantis Scope 3
evaluator tool developed by the GHG Protocol, customised for
in-house carbon accounting. To improve its accuracy, the tool’s
proxy carbon emissions data is augmented with data from our
key vendors, plus direct measurement of some emissions data.
For 2022, we extended our scope 3 emissions evaluation across
all relevant categories. The total emissions footprint of our value
chain was assessed to be 38.2 million tCO
2
e, with the majority
(35 million tCO
2
e) falling within the category of ‘Use of Sold
Products’, reecting the operating lifetime of the energy intensive
facilities we build. These scope 3 emissions have been veried
through an external third party.
A key part of our Net Zero commitment is to support the low-
carbon ambitions of our value chain and reduce our scope 3
emissions. To these ends, our programme was also advanced
with the Supply Chain team to identify the most carbon-
intensive goods and services, engage with key suppliers, and
incorporate their carbon data into our vendor management
system. However, the challenge we face is that, in several of
our geographies, key players in carbon-intensive commodities
such as steel production are yet to declare the carbon footprint
of their products. As expectations for this type of data increase
across the wider market, we anticipate this situation will improve,
and we will support key suppliers in establishing their respective
carbon assessment and reduction programmes.
We also benchmarked our scope 3 programme against the
progress being made by our peers. This exercise demonstrated
that, in relative terms, we are among the sector leaders.
In 2023, we will continue to enhance our scope 3 assessments.
As our condence in the integrity of the data and our
understanding of our value chain’s decarbonisation plans grow,
we intend to publicly report on our related emissions and to set
credible time-bound targets for their reduction.
Supporting community-based
environmental initiatives
As an energy services company operating across many
geographies, we are often faced with environmental challenges,
and work with clients, community groups, and other
stakeholders to develop effective solutions to protect the
natural environment.
Examples include:
• In Malaysia, 20 of our team members took part in a public
tree planting programme at the Kuala Langat North Forest
Reserve in Selangor state, supporting Malaysian Environment
Day. The initiative supported the Malaysian government’s
campaign to plant 100 million new trees, and was organised
by the Selangor State Forestry Department and several
NGOs. On the day, our volunteers planted 90 trees out
of a total of 450.
• In Oman, which is one of the Arab world’s most engaged
countries in the protection of natural habitats, we became
corporate members of the Environmental Society of
Oman (ESO). The country’s wadis and beaches are home to
many rare species of wildlife, but are under threat from
persistent plastic waste. To mark Arab Environment Day, we
supported ESO with an awareness campaign and several of
our people took part in clean-up activities that helped prevent
plastic waste from entering the marine ecosystem.
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Environmental, Social and Governance continued
• In Thailand, we invited the local community to commemorate
both World Environment Day and Father’s Day (in June and
July respectively) by joining tree planting activities held at
Banthung Community Park located nearby to the site of our
Thai Oil Clean Fuels Project. We also supported Big Cleaning
Days three-times every week in the nearby community to
ensure that any dust, debris or waste inadvertently left by
project vehicles and workers is cleaned up. Involving our
subcontractors as well as our own employees, these regular
sessions involve the thorough spraying and washing of roads,
refuse collection, and beach clean-ups. In addition, we
worked with the local fishing community to install almost 100
fish aggregating devices – used to attract fish and provide
food for them.
Reducing our use of water
At various project sites, such as Ain Tsila in Algeria and
Qusahwira in the UAE, we introduced wastewater re use
initiatives, using treated water for dust control and tree watering.
We also found new ways to reduce the amount of water we use
in our projects. At our GC32 project in Kuwait, for instance, we
optimised water use during the hydrotesting phase, which saved
more than 50,000m³ of fresh water – equivalent to the daily water
consumption of 135,000 people in Kuwait.
Phasing out single-use plastics
During 2022, we were successful in phasing out those single-
use plastics that are within our direct control at all our ofces
and many project sites. Often, these have been home-grown
solutions proposed by the onsite project team: on the Ain
Tsila project in Algeria, we provided water asks in the ofce
and installed a compaction facility onsite; at the BAGSF-2 site
in Malaysia, we distributed reusable water bottles and food
containers; and, on our project sites in India we replaced plastic
safety cones with metal barricades, introduced stainless steel
utensils and thermo-steel bottles, and provided additional
water dispensers.
Introducing more circular economy solutions
We are progressing our target of adopting a circular economy
across our sites, with each site required to have a plan in place
that focuses on:
• Designing out – engaging our project teams, from our
engineers to our supply chain, to ‘design out’ waste
• Optimising use – exploring ways to use resources for longer,
stretching the lifespan of materials and products
• Recycling more – creating opportunities to improve what we
recycle, reduce our landfill waste and put more of our
‘waste to work’
At the GC32 project site in Kuwait, for example, we encouraged
our suppliers to collect and reuse around 5,000 electrical wire
and cable drums which, together, weighed around 500 tonnes.
At the Visakh project in India, we repurposed around a tonne of
waste metal into barricades, signboards, and storage racks. At
Qusahwira Phase II project in the UAE we reused old tyres as
road barriers and as soil retainers for tree planting.
Progressively reducing our energy use
We continue to nd new ways to reduce our energy use and
avoid the associated emissions. On the FPF-003 vessel in
Thailand, for instance, we replaced uorescent lamps with LED
equivalents, and we also introduced site bicycles on several
more of our projects around the world.
We also look at new, more energy-efcient ways of working. A
good example is the SNOC project in the UAE, where we would
ordinarily have used a barge as part of our operations. Instead,
we introduced a 750-tonne crane, which was signicantly more
energy efcient, and reduced the risk of marine pollution.
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Task Force on
Climate-related
Financial
Disclosures
We are committed to supporting the recommendations
of the Task Force on Climate-related Financial
Disclosures (TCFD). This report outlines the progress
we have made against the recommendations.
We have also built on this programme, integrating
it further into our existing risk and governance
processes and incorporating the TCFD Good
Practice Recommendations from the Financial
Reporting Council (FRC)
1
.
Governance
Climate change is a material governance and strategic issue
that is regularly addressed by our Board and Executive team
through strategy and investment discussions, enterprise
risk management, and performance review against our
commitments.
Our Net Zero Steering Group, which reports to members of
the Executive team, and periodically to the Board, provides
support, guidance, and oversight of progress on our Net Zero
programme. The Steering Group is supported by a TCFD
Working Group that monitors and evaluates climate-related risks
and opportunities and tracks management actions.
Performance is reported periodically to the Executive team
and the Board through bi-monthly key performance indicator
(KPI) metrics and regular presentation of related technical and
strategic papers.
Informing our strategy
Our strategic risk and opportunity reviews continue to be
informed by a range of sector analyses, including the full range of
future scenarios developed by the International Energy Agency.
The scenarios are used to aid our understanding of how the
pace and nature of the energy transition may affect our strategy,
and the actions we can take to build resilience and pursue
related opportunities.
We actively manage climate-related physical and transition
risks, ranging from the increased potential for extreme weather
events to disrupt our operations to the evolving policy landscape
that may impact the Group, such as carbon taxation or more
restrictive emissions legislation.
In 2022 we regularly engaged with policymakers, contributing to
their public consultation programmes, offering our expertise, and
encouraging all industry stakeholders to support a just transition.
The transition to a lower carbon economy also presents climate-
related risks and opportunities to our business. As well as
taking action to meet our Net Zero carbon commitments, we
are rapidly developing our capabilities to unlock value for our
clients by helping them to decarbonise their existing operations,
and by helping them to plan, build and manage new assets in
the offshore wind, hydrogen, CCUS, and waste-to-value market
segments. See pages 16-19 for detail on the short-term and
long-term market outlook and how our strategy addresses future
risks and opportunities.
Climate risk management
Climate-related risks are classied according to the TCFD’s
risk management framework. This addresses transition and
physical risks, such as the evolving policy landscape, the shift
to a low-carbon economy, changing stakeholder perceptions
and preferences, and risks that are event-driven, such as the
increased severity of extreme weather, as well as longer-term
shifts in climate patterns.
Issues such as changing energy usage and the shift to a low-
carbon economy are also assessed for the opportunities they
create as we look to expand our new energies business.
Assessments are undertaken over three-year and ten-year
timeframes to align with business planning and long-term
strategic time horizons.
Climate-related risks and opportunities arising out of the
energy transition are fed into the enterprise risk management
programme and consolidated into our principal and emerging
risks, which are reviewed by the Group Risk Committee,
endorsed by the Audit Committee, and approved by the Board.
Further detail on the identied climate-related issues and how
they affect the business, its strategy and nancial planning is set
out in our full response to the 11 TCFD recommendations (see
pages 38-48).
1. FRC CRR Thematic review of TCFD disclosures and climate in the financial statements, July 2022
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Metrics and targets
Petrofac is committed to becoming a Net Zero company by
2030, with our Asset Solutions business unit achieving Net
Zero by 2025. We have also set decarbonisation targets that
support the principles of the Paris Climate Agreement, the
UK Government’s Net Zero goal, and are aligned with our
clients’ respective ambitions as the energy sector progressively
decarbonises.
We also expect our NES business to grow rapidly and have
targeted that, in the medium term, this will account for 20% of
our revenues.
In 2022 we continued to develop a carbon intensity ranking
for each of our projects and operations. The objective is to
benchmark each part of the business, identify examples of good
practice, pinpoint areas that require additional work, and hold
line managers accountable for meeting local decarbonisation
targets. This has proven problematic due to the inherent
variability of projects obscuring carbon losses and gains, making
it difcult to benchmark the performance of a project located in
an area with infrastructure that can facilitate decarbonisation (e.g.
EV charging, mature transport links, etc) from one that is remote
from enabling infrastructure. As a solution, we opted for targets
related to implementing our new decarbonisation guidance,
assessing projects’ progress undertaking gap analyses, and
delivering improvement plans.
Meanwhile, we continue to encourage the adoption of emissions
reduction targets among key suppliers. We also continued to
assess our Scope 3 emissions, and should be in a position to
nalise supply chain engagement targets in 2023 with a focus on
the most carbon-intensive goods and services.
Finally, accountability for climate change leadership and
decarbonisation continues to be embedded into executive
performance measures and remuneration. This means that
we are actively incentivising our leadership to accelerate our
transition to a low-carbon business.
In compliance with Listing Rule 9.8.6(8), our climate-related financial disclosures, are summarised here, with the status of our
compliance with the TCFD Recommendations and Recommended Disclosures set out in implementing the Recommendations of
the Task Force on Climate-related Financial Disclosures published in October 2021.
Process
and role of
Committees
Climate change is a material governance and strategic issue that is regularly addressed by our Board and
Executive team through strategy and investment discussions, enterprise risk management, and performance
reviews against our commitments.
The Board is responsible for oversight of the overall conduct of the Group’s business, which extends to setting
our climate response strategy and approach to the energy transition. The Board is assisted by four Board
Committees: Audit, Compliance and Ethics, Nominations and Remuneration. These Committees each have
risk management oversight relevant to their specic areas of responsibility, and where relevant this includes the
management of energy transition and climate risks.
For example, the Audit Committee has delegated responsibility for monitoring and reviewing the integrity and
effectiveness of the Group’s overall risk management framework, which covers the management of energy
transition and climate risks.
The Board and its Committees typically meet every two to three months. Climate and energy transition issues
are discussed at each Board meeting.
DISCLOSURE
LOCATION
Pages 76-77, 103
Examples of
the Board and
relevant Board
Committees
taking climate
into account
In 2022 the Board progressed key actions dened by the Chair from the annual effectiveness review, including
continued development of the sustainability strategy and the ESG roadmap, clearly dening the Group’s
direction on energy transition, climate resilience and response.
Individual Board members have also made themselves available to consult on elements of the transition plan, for
example providing a deep-dive review and feedback on opportunities arising out of our scope 3 decarbonisation
strategy.
Performance is reported periodically (typically bi-monthly) to the Executive team and the Board through key
performance indicator (KPI) metrics that include:
• Progress incorporating low-carbon services into bids and tenders
• % of purchased electricity switched to renewable sources
• Progress on emissions reduction initiatives
RECOMMENDATION RESPONSE
Governance
a) Describe the Board’s oversight of climate-related risks and opportunities
Environmental, Social and Governance continued
Task Force on Climate-related Financial Disclosures
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Task Force on Climate-related Financial Disclosures continued
Who manages
climate-related
risks and
opportunities
The assessment and management of climate-related risks and opportunities
is integrated into the Executive team’s area of responsibility as climate-
related objectives. Associated targets and KPIs are cascaded down through
line management and incorporated into staff scorecards.
DISCLOSURE
LOCATION
Page 11
How
management
reports to
the Board
The Board and its Committees are updated on climate-related issues by the
Company Secretary’s ofce, which works closely with the Executive team
to develop materials that assist the Board and its Committees in discharging
their responsibilities.
In addition to these Board committees, there are a number of executive
management committees in place, which meet more frequently (biweekly or
bimonthly), and are involved in assessing the materiality of climate-related
and energy transition risks and opportunities and considering matters for
recommendation to the Board and its Committees.
The Group Head of Quality, Health, Safety, Security, Sustainability and
Environment is the principal point of contact with the Board and Group
Executive for ESG-related matters.
DISCLOSURE
LOCATION
Page 103
Processes
used to inform
management
The Net Zero Steering Group is responsible for providing support, guidance
and oversight of progress on our Net Zero programme. This Steering Group
is supported by a TCFD Working Group that reviews compliance, monitors
and evaluates climate-related issues and tracks actions.
Carbon Management Teams (CMTs) established within each business unit
take local ownership for delivering decarbonisation.
In 2022, the following CMTs progressed decarbonisation efforts that were
periodically reported to management and up to the Board:
• Low-carbon offices
• Low-carbon sites
• Scope 3/supply chain
• Engineering
• Digital, and
• Carbon/Flare Reduction Task Force
Communication mechanisms are well dened, with climate-related matters
and progress on our Net Zero and new energies strategies discussed at
each of our global townhall meetings, BU leadership calls, and quarterly HSE
webcasts accessible to all staff. In addition, a regular status report (typically
quarterly) is provided to the Executive team on decarbonisation progress
through the Net Zero Steering Group’s meeting minutes.
DISCLOSURE
LOCATION
Pages 20-23; 29; 57 Disclosure level: Full
RECOMMENDATION RESPONSE
Governance
b) Describe management’s role in assessing climate-related risks and opportunities
b) Describe management’s role in assessing climate-related risks and opportunities continued
a) Describe the Board’s oversight of climate-related risks and opportunities continued
Examples of
the Board and
relevant Board
Committees
taking climate
into account
continued
• GHG intensity reduction across each business unit, and
• Effective supply chain decarbonisation
• In addition to KPI metrics, in 2022, several technical and strategic papers
and progress updates were presented (quarterly to six-monthly) on our
Net Zero and new energies strategies, plans, and progress.
The Board also evaluates new business development opportunities (such
as late-life asset management and decommissioning) against the potential
to impact our Net Zero commitments, balancing market needs for energy
security with the importance of enabling the transition to the low-carbon
energy sector.
DISCLOSURE
LOCATION
Pages 2; 4-7; 32-34 Disclosure level: Full
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Processes used
to determine
material
risks and
opportunities
Our strategic risk and opportunity reviews continue to be informed by
a range of sector analyses, including the full range of future scenarios
developed by the International Energy Agency (IEA). The following scenarios
are used to aid our understanding of how the pace and nature of the energy
transition may affect our strategy, and the actions we can take to build
resilience and pursue related opportunities:
• Low Carbon Future (based on IEA Net Zero by 2050 Scenario) –
characterised by industry alignment with the Paris Agreement, rapid
acceleration to a low-carbon economy, green technology breakthroughs,
and global policy coordination on carbon tax and emissions that
materially reduces fossil fuel use.
• Mid-point (based on IEA Announced Pledges Scenario) – characterised
by the announced ambitions and targets (as of September 2022) to
achieve net zero emissions by 2050, with countries fully implementing
their national targets to 2030 and 2050, an acceleration of the low-
carbon economy and the enabling global policy framework, market
dynamics and technological progress.
• High Carbon Future at more than 3°C (based on IEA Stated Policies
Scenario) – characterised by current policy intentions and targets.
Energy demand rising by 1% per year to 2040, with low-carbon sources,
led by solar PV, supplying more than half of this growth, though the
momentum behind clean energy technologies is insufficient to offset the
effects of an expanding global economy and growing population. The
rise in emissions slows, but with no peak before 2040, and the world falls
short of the Paris climate goals.
We actively manage climate-related physical and transition risks, ranging
from the increased potential for environmental and safety incidents to disrupt
our operations (across all time horizons), to the current evolving policy
landscape (short-term horizon) that may impact the Group, such as carbon
taxation or more restrictive emissions legislation.
We reviewed the impact of the EU Green Deal and the Carbon Border
Adjustment Mechanism (CBAM) over both short and medium-term horizons,
with CBAM commencing in 2023 and the accompanying charging regime
commencing in 2026 and impacting our EU-based projects.
DISCLOSURE
LOCATION
Pages 16-19; 20-23; 76-77
RECOMMENDATION RESPONSE
Strategy
a) Describe the climate-related risks and opportunities the organisation has identied over the short, medium and long term
Relevant time
horizons
In reviewing our strategy, we consider a wide range of opportunities and
risks across two discrete time horizons:
• Short-term (0-3 years): defined by detailed business and financial plans,
which are performance managed in delivery of our business plan targets
• Medium to long-term (4-10 years medium-term, 10+ years long-term):
given the rapid pace of external change and the wide range of
uncertainties, this time horizon enables us to consider longer-term
scenarios and possible energy transition pathways.
Environmental, Social and Governance continued
Task Force on Climate-related Financial Disclosures continued
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RECOMMENDATION RESPONSE
Strategy
a) Describe the climate-related risks and opportunities the organisation has identied over
the short, medium and long term continued
Task Force on Climate-related Financial Disclosures continued
Transition or physical climate-related risks identied
Risk Driver Risk Time Horizon Risk Management
Policy – current &
merging government
climate policies and
regulations
Decreased investment
in O&G due to higher
operational costs (carbon
taxes & levies), reduced
licences or policy shifts
Medium term Government consultation and advocacy
strategy supporting appropriate climate
action and policies that deliver net-zero
goals while providing stability for business.
Close monitoring of the policy landscape
in core geographies to ensure business
preparedness, including de-risking asset
nancial assumptions against potential
policy shifts
Market – transition to a
low carbon economy
Loss of market share and
erosion of backlog
Long term A New Energy Services NES line created
to build capability to advance the
company’s position within the energy
transition and target a greater market
share of non-O&G projects
Reputation –
deteriorating stakeholder
sentiments towards
fossil fuels
Increasing ESG- focused
investors allocate capital
away from O&G sector,
increased negative
screening and higher cost
of capital
Short term Cogent ESG strategy focused on
material issues, supported by proactive
stakeholder engagement.
Executive remuneration linked
Transition or physical climate-related opportunities identied
Opportunity Driver Opportunity Time Horizon Opportunity Capture Strategy
Markets – new energy
markets
Deliver material growth
and increased market
share through the energy
transition.
Medium –
long term
Advance New Energies strategy to target
renewables and low carbon sectors
Products & services
– growth of low carbon
economy
Increased demand for
low carbon solutions and
services.
Short term Advance Petrofac’s net-zero strategy,
expand low carbon service offering,
emissions reduction consultancy and
deployment of digital analytical tools.
Disclosure level: Partial
Disclosures regarding the detail of our climate-related
risks and opportunities in each of the warming
scenarios will be further enhanced in 2023, including
further information on nancial impact and likelihood.
DISCLOSURE
LOCATION
Pages 78-87
The transition to a lower carbon economy presents both risks and signicant business opportunities
for Petrofac. Climate-related physical and transition risks are managed and reported as part of the
Group’s risk management framework.
b) Describe the impact of climate-related risks and opportunities on the organisation’s
businesses, strategy, and nancial planning
Impact on
strategy,
business,
and nancial
planning
The potential implications of climate change and the energy transition
building momentum are described in the Market outlook and new energies
related sections of this Strategic report.
We review the renewables and low-carbon sectors in depth to identify where
our technical expertise and delivery experience would be the most valuable
to clients. Based on this analysis, we have aligned our experience in high
voltage systems, offshore platforms, gas processing, clean fuels and grey
hydrogen to where clients need our ability to integrate and manage risk
around large complex capital project delivery. As a result, we are focusing
our NES strategy on Offshore Wind, CCUS, Hydrogen, Waste-to-Value, and
Emissions Reduction. In the medium term, we are targeting that NES will
account for at least 20% (~US$1 billion targeted) of our revenues.
In addition to advancing new energies, the Group’s ambition is to become a
Net Zero company by 2030 (scope 1 & 2 emissions).
The Group’s current climate change strategy focuses on reducing GHG
emissions, investing in low-emission technologies, supporting emission
reductions in the value chain and promoting product stewardship, managing
climate-related risks and opportunities, and working with others to enhance
the global policy and market response.
Petrofac is also progressing a scope 3 emissions programme, engaging
our value chain on decarbonisation strategies to enable their low-carbon
ambitions.
In 2022, we continued to consider the impact of climate-related issues on
our nancial planning, for example analysing the likelihood and impact of
increased insurance premiums related to extreme weather events, and de-
risking nancial assumptions and contract renewal terms against possible
carbon taxation for our producing assets in Malaysia. We aim to further
enhance our processes and assurance as we develop a more mature
understanding of the risks, opportunities and interdependencies of climate-
related issues on the business.
DISCLOSURE
LOCATION
Pages 4-7; 28-36
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RECOMMENDATION RESPONSE
Strategy
b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and nancial planning continued
Task Force on Climate-related Financial Disclosures continued
Impact on
products and
services
To achieve our Net Zero ambition, we recognise that much of our workforce
will need to have additional skills and capabilities.
One of the programmes under implementation is a competency mapping
exercise, to understand what transferable skills we already have and what
skills will be required to support the transition and ensure alignment with
government and industry initiatives and client requirements.
DISCLOSURE
LOCATION
Pages 10-11
Impact on our
supply chain
A programme was commenced targeting the most carbon intensive parts of
our supply chain (e.g. steel, cement, copper, logistics). Our Net Zero supply
chain workstream continued to engage with suppliers, encouraging them
to establish their own GHG emission reduction targets and decarbonisation
plans. Climate-related risks are also built into our supply chain due diligence.
By extending our local delivery model, we are continuing to reduce our
reliance on international supply chains, matching local suppliers with project
opportunities, and improving our logistics efciencies, carbon footprint and
supply chain resilience.
DISCLOSURE
LOCATION
Pages 14-15; 35; 60-63
Impact on our
value chain
A low-carbon plan has been developed through consultation with key
functional teams and is being incorporated into bids, outlining Petrofac’s
low-carbon service offering and decarbonisation strategies. Further
development of our low-carbon services is planned for 2023, with the aim
to highlight to clients in the pre-tender phase the range of opportunities
available to them to decarbonise, and Petrofac’s capabilities to support
these initiatives.
In addition, we are updating our Net Zero strategy and programme,
incorporating all elements into a Net Zero transition plan aligned to the UK
Transition Plan Taskforce (TPT) Framework.
DISCLOSURE
LOCATION
Page 35
Environmental, Social and Governance continued
Impact on our
ofces
Purchased energy emissions comprise 4% of our total carbon footprint. Our
target is to progressively transition to 20% renewable energy by 2030 and we
are pursuing opportunities to switch to renewable energy across the Group.
Most of our UK ofces and facilities have already switched to renewable power,
and we have transition plans in place for our other permanent ofces globally.
Meanwhile, our Green Building Standard helps us to select and promote
more sustainable premises and, through Energy Savings Opportunity Scheme
assessments, our UK ofces have improvement plans in place.
DISCLOSURE
LOCATION
Pages 32-34
Impact on
operations
Our production operations account for 88% of our total carbon footprint,
largely due to aring, venting, fugitive emissions and fuel gas. Our aim
is to deliver a 25% reduction in emissions by 2030 through operational
improvements, gas shut-off and power generation changes. We are
also targeting a 30% reduction in emissions intensity by 2030 from our
construction operations through savings from energy efciency and hybrid
power generation initiatives.
DISCLOSURE
LOCATION
Pages 32-34
Impact on
nancial
planning
The nancial impact of climate-related risks and opportunities are
periodically evaluated, principally over short to medium-term horizons and
across different climate scenarios.
Allowances are incorporated into nancial plans to mitigate risks and
advance opportunities. Examples include:
• Additional financial contingency built into project and operational
budgets to account for the increased frequency and severity of climate
and its impact on weather-sensitive events.
• Periodic review of voluntary offset carbon markets, projected carbon
prices and development of a carbon offset strategy to mitigate pricing
and offset quality risks.
• Contractual provisions to mitigate the risk of evolving climate legislation,
such as the EU Carbon Border Adjustment Mechanism, which was
evaluated against the projected steel imports for a range of EU based
projects under tender, and contractual clauses implemented to mitigate
potential supply chain cost impacts.
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Impact on
nancial
performance
and liabilities
The acceleration of investment in new energies is expected to have
exceeded US$1.4 trillion in 2022, including strong growth in offshore wind,
carbon capture usage and storage (CCUS), hydrogen, and waste-to-value
projects. In each of these, we have evaluated the addressable market of
opportunities (total US$10.9 billion) and carry a positive revenue impact of at
least US$1 billion to our mid term nancial performance.
We also continually monitor the nancial impacts and liabilities of a range
of climate-related risks ranging from the policy framework necessary to
support our growth in new energies to carbon pricing and fossil fuel policies
that could impact the operating costs of our producing assets (PM304). At
present, while these risks are evolving, they are not yet at a threshold to be
considered material (i.e. US$10 million impact to net income).
DISCLOSURE
LOCATION
Pages 17-19; 82 Disclosure level: Full
RECOMMENDATIONRECOMMENDATION RESPONSERESPONSE
DISCLOSURE LOCATION
StrategyStrategy
b) Describe the impact of climate-related risks and opportunities on the organisation’s
businesses, strategy, and nancial planning continued
Task Force on Climate-related Financial Disclosures continued
Embedding
climate into
scenario
analysis
We believe our strategy and targets are resilient to a range of energy transition
pathways (based on IEA scenarios) and are aligned to the outcomes of
COP27, the climate commitments of respective governments, and the drive
for emissions reductions which will continue to be a key priority in all markets.
In 2022 we started to systematically integrate the potential outcomes of
different climate scenarios into our strategy and nancial planning process
to ensure our capital allocation was appropriately aligned with the energy
transition and the evolving risks and opportunities. This included a review
of climate-related issues undertaken by each business unit CFO as part of
the annual nancial planning process.
Our analysis and that of others, including the IEA, have shown that across
a range of climate scenarios; from a rapidly decarbonising world (our Paris-
aligned 1.5°C Net Zero scenario) to one where only current policy targets
are realised (our high carbon future), the demand by clients for our services
across both traditional O&G and new energies (such as wind, CCUS,
hydrogen, etc) remains resilient.
Overall, this analysis reinforced our condence in the resilience of our
strategy to a wide range of transition scenarios and its long-term viability.
DISCLOSURE
LOCATION
Pages 16-19
c) Describe the resilience of the organisation’s strategy, taking into consideration different
climate-related scenarios, including a 2°C or lower scenario
How we factor
in evolving
government
policy
We regularly engage with policymakers, contributing to their public
consultation programmes, offering our expertise, and incorporating
evolving developments into our strategy and scenario planning. We
engage on a regular basis with UK and Scottish government departments,
particularly the Department of Business, Energy, and Industrial Strategy
(BEIS) and the Department of International Trade (DIT).
In 2022 at COP27, we engaged with the DIT Egypt and Africa teams at
various levels exploring opportunities to support the DIT in the MENA
region and advance Petrofac’s new energies strategy.
DISCLOSURE
LOCATION
Page 23
How we
collaborate with
industry to build
resilience
We believe substantive input from industry and other stakeholder
organisations leads to better outcomes on evolving policy, practice, and
standards.
In 2022 we undertook and supported a variety of collaborative initiatives as
members of various industry trade bodies, such as Offshore Energies UK,
Renewable UK and the Energy Industries Council, and organisations specic
to the new low-carbon technologies, such as Global CCUS, Wind Europe,
NECCUS, the Hydrogen Fuel Cell Association, and the Hydrogen Strategy Now
campaign.
We have also created alliances with several technology providers and
developers across our new energies strategic priority areas, as well as the
Hitachi Energy partnership in offshore wind, to best position the Group to
advance opportunities in these sectors.
Examples of our engagement included:
• Our partnership with the Oman Hydrogen Centre (OHC), who we are
collaborating with in building capabilities for Oman’s renewable energy
sector, particularly in green hydrogen.
• Our delegation at COP27, enhancing collaborative partnerships with a
range of traditional and new energy stakeholders focused on scaling
up decarbonisation and climate resilience.
DISCLOSURE
LOCATION
Page 23
c) Describe the resilience of the organisation’s strategy, taking into consideration different
climate-related scenarios, including a 2°C or lower scenario continued
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Ensuring
continued
relevance of our
strategies
As the world adjusts to an unprecedented energy crisis and macro-
economic slow-down, and our clients seek to nd the best long-term
balance between energy security, affordability, and sustainability. Our
growth strategy is continually recalibrated to the near-term exigencies
of energy security and affordability, maximising current production with
the lowest carbon footprint from our producing assets and targeting
opportunities within our traditional O&G and offshore wind markets. While
in the mid to long-term, accelerating decarbonisation and the transition to
a low carbon energy sector through CCUS, hydrogen and waste-to-value
growth strategies.
Evolving changes to global climate change strategy or decarbonisation
milestones are continuously monitored by the Net Zero Steering Group and
the TCFD Working Group.
As part of our governance processes our strategy is validated annually
by the Board to ensure it remains relevant and resilient. As our approach
matures, we will look to begin incorporating greater nancial quantication
and internal assurance into our climate risk analysis.
DISCLOSURE
LOCATION
Pages 76-77
RECOMMENDATION RESPONSE
Strategy
Task Force on Climate-related Financial Disclosures continued
Environmental, Social and Governance continued
How climate
resilience builds
future viability
Recognising the potential of the transition to occur faster or slower than
anticipated and on different pathways, we retain exibility in our allocation
of capital and resources, to ensure these are aligned to the evolving
climate risks and opportunities.
In FY2022, we regularly reviewed our strategic focus and right-sized
resources to ensure we did not miss investment opportunities due to a lag
in our capability development and service offering. While also calibrating
the speed and development of our low carbon services to better align to
opportunities, client requirements, and the enabling policy frameworks that
support the low carbon transition. This resulted in structural changes such
as the development of our 1tec delivery model, as well as downsizing to
parts of our business.
We have also had to retain exibility in our net-zero strategy, as lower-
than-expected order intake has limited the new opportunities to deploy
decarbonisation at scale, curtailing our transition to a lower carbon
business. In addition, decarbonisation inertia in critical parts of our supply
chain (eg. steel products) has impacted our low carbon delivery strategy.
We are committed to integrating climate risk and opportunity capture into
the Company’s growth strategy and management processes. Progressing
this dual strategy of decarbonising our operations while leveraging low-
carbon growth opportunities ‘future-proofs’ the organisation as the energy
sector transitions.
DISCLOSURE
LOCATION
Pages 94-96 Disclosure level: Partial
Disclosures regarding the resilience
of our strategy in each of the warming
scenarios will be further enhanced in
2023.
c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario continued
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Task Force on Climate-related Financial Disclosures continued
RECOMMENDATION RESPONSE
Risk management
a) Describe the organization’s processes for identifying and assessing climate related risks
continued
b) Describe the organisation’s processes for managing climate-related risks
Process Our risk management framework provides us with a consistent approach
to identify, manage and oversee the risks that may impact our business.
The scope and size of issues considered is aligned to TCFD guidance and
follows Petrofac’s Enterprise Risk Management process. This effective risk
analysis and response underpins our ability to achieve our objectives and
assess opportunities as our business evolves.
In 2022, in addition to risk and opportunity meetings with key functions,
the following climate-related issues were incorporated into our business
and nancial planning process through brieng sessions on focus areas for
consideration:
Function Focus area
Risk, Finance and
Tax
Markets, Products & Services – impacts on access to, and
cost of capital, potential impacts of carbon taxes, opportunities
to access green nance or ESG nancial instruments
Physical risks – impact on availability and cost of insurance
Strategy and
Business
Development
Markets, Products & Services – shifts in supply and demand
for energy services
Technology – risks/opportunities of low-carbon economy
Communications
& Investor
Relations
Reputation – evolving stakeholder perceptions of fossil fuels
and changing social norms
Markets – changing investor sentiments and impact/
opportunities for liquidity, investor condence, share price
Projects legal Current & Emerging Regulations – transition risks and
opportunities of the evolving climate policy landscape
Projects supply
chain
Market – shifts in the availability, vulnerability and cost of critical
commodities and services
Projects HSSEIA
operations
Physical Risk – acute/chronic risks to people and assets
Current & Emerging Regulations – transition risks of evolving
policy landscape and impact on operating costs, licence access, etc.
Resource Efciency – availability, vulnerability and cost of
critical commodities and services
Legal Legal – climate-related litigation and enforcement action risks
We continue to integrate climate risk into the supporting policies, processes,
and controls for our key climate risks, and intend to update these as our
climate risk management capabilities mature over time.
DISCLOSURE
LOCATION
Pages 76-77 Disclosure level: Full
Process Our risk management framework provides us with a consistent approach
to identify, manage, and oversee climate-related risks that may impact our
business and is designed to underpin the Group’s longer-term sustainability
(for further details see the Risk management section of this Strategic report).
As part of our business planning process, we review the Group’s principal
risks and uncertainties quarterly. Energy transition risks are captured within
the principal risk ‘Failure to deliver New Energy Services (NES) strategy’ and
covers various aspects of how risks associated with the energy transition
could manifest.
In addition to our established risk management processes, a climate risk and
opportunity programme was progressed, with meetings held with the key
functional teams to:
• identify material impacts and opportunities (transition and physical)
• assess financial impacts (qualitative assessment of range, with
materiality threshold > USD10m impact on net income)
• recommend actions for risk management and opportunity capture
The scope of risks and opportunities were considered across three parts of
our value chain:
• Upstream: activities, products and services that are inputs to our
business sourced from third parties, such as the regulations and policies
applied by governments and the products and services provided by our
supply chain.
• Direct operations: the day to day activities to deliver the projects/
services to our clients.
• Downstream: the third parties benefiting from the outputs, products and
services of our business activities.
DISCLOSURE
LOCATION
Page 82
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RECOMMENDATIONRECOMMENDATION RESPONSERESPONSE
StrategyRisk management
b) Describe the organisation’s processes for managing climate-related risks continued
Environmental, Social and Governance continued
Task Force on Climate-related Financial Disclosures continued
Process
continued
Risks were viewed over short, medium and long term time horizons, with
likelihood of occurrence assessed as:
Probable: > 50% chance of occurrence
• Possible: 15-50% chance of occurrence
• Unlikely: 5-15% chance of occurrence
• Rare: <5% chance of occurrence
Similarly, physical climate-related risks such as extreme weather are covered
in our principal risks related to HSE incidents.
Identied risks are prioritised in terms of their materiality, enabling decisions
on the adequacy of our controls and the most appropriate and cost-effective
response calibrated to the risk appetite of the Group. Ownership of risks
falls within the responsibility of each function, with the TCFD Steering Group
supporting the monitoring and close-out of actions.
DISCLOSURE
LOCATION
Page 84 Disclosure level: Full
c) Describe how processes for identifying, assessing, and managing climate-related risks are
integrated into the organisation’s overall risk management framework
Implemented
risk
management
Transition and physical climate-related risks are identied, assessed, and
managed across the Group, addressing issues such as evolving policy,
threat of legal action, market changes, reputational issues, and extreme
weather.
Risks and opportunities are integrated into the overall risk management
framework through their contribution to and /or impact on principal
risks and sub risks, for example; how failure to deliver on our Net Zero
commitments may impact our NES strategy. Further examples include:
• Policy risks – government consultation and advocacy strategy that
supports appropriate climate action while providing stability for
business.
• Market risks – the new energies business line was created in 2021 to
build capability to advance the Company’s position within the energy
sector’s transition. We have since established a medium-term revenue
target at least US$1 billion.
• Disruptive events – such as Russia’s invasion of Ukraine are also
considered as they are likely to complicate the transition’s path. Slowing
near-term decarbonisation due to the exigencies of energy supply,
though potentially accelerating decarbonisation pathways in the longer
term through the need to boost energy-efficiency measures and adopt
renewable-energy alternatives to fossil fuels.
• Capability and resourcing risks – Petrofac recognises that, to advance
our business as the energy sector transitions, we will need new skills and
capabilities. To enable this a Workforce Reskilling Taskforce was set up
to bring together colleagues who can help develop solutions to enable
the upskilling of our workforce in line with our energy transition strategy
and the UK Government’s objectives set out in the North Sea Transition
Deal.
• Production risks – to reduce our flaring and fugitive emissions, gas
management plans have been implemented. Developments in 2022
include a 36% reduction in flaring intensity at our production asset in
Malaysia, and the switch from diesel to gas generation, utilising gas
which would otherwise have been flared.
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RECOMMENDATION RESPONSE
Risk management Metrics and targets
c) Describe how processes for identifying, assessing, and managing climate-related risks are
integrated into the organisation’s overall risk management framework continued
Implemented
risk
management
continued
• Fines or other regulatory penalties – whilst difficult to predict how these
might crystalise, the base case cost contingencies and downside
adjustments aim to capture any exposure here as well as other legal/
regulatory risks on other aspects of the business. We undertake a
periodic review of the voluntary carbon offset market to have visibility of
future offset costs and on current assessment.
• Extreme weather – in the base case, our business budgets are
formulated using industry knowledge of operating in extreme weather
conditions (e.g. North Sea storms, Malaysian monsoons, desert
climates, etc.) and contingencies are included accordingly, whether by
way of cost or scheduling contingencies or both. In the downside
scenario, the business has captured the risk of further downside within
the scheduling delays and cost overruns in E&C, margin reduction in
Asset Solutions and production downside in IES.
DISCLOSURE
LOCATION
Pages 20-23; 76-77; 82-84 Disclosure level: Full
Our
business
performance
Petrofac sets KPI targets for business performance and delivery of our
strategy and assesses progress against these benchmarks on a regular
basis.
DISCLOSURE
LOCATION
Pages 26-27
Price
assumptions
A range of probable price scenarios are selected for carbon offset
calculations and the voluntary offset market is monitored to inform our future
offset strategy.
The BloombergNEF Long-Term Carbon Offset Outlook is used as a primary
indicator of the evolving prices of offsets input into future offset price
assumptions to account for the cost of achieving Net Zero.
ESG metrics
Our ESG strategy is guided by a full set of related KPIs which are included in
the ESG strategic sections of this report. The key climate-related metrics are
outlined. Performance is reported periodically to the Executive team and the
Board through monthly and bi-monthly metrics and regular presentation of
related technical and strategic papers:
DISCLOSURE
LOCATION
Page 31
Goal KPI Target (by year end 2022)
Low carbon offering to be
included in bids/tenders
% of bids including a low carbon offering 75%
Accelerate transition to
renewable energy
% of purchased electricity from renewable
sources
>18%
Progress site decarbonisation
by energy efciency & emission
reduction initiatives
PROJECTS
GHG intensity reduction
(ktCO
2
e/million hrs) – Scope 1 & 2
3% reduction annually
Process ofce energy efciency OFFICES
Energy intensity reduction
(consumption/million hrs)
3% reduction annually
Effective supply chain
decarbonisation
Baseline inventory/decarbonisation plans for
top 5 carbon intensive goods/services
Incorporate low carbon into
supply chain prequalication
process
Eliminate or reduce the use of
Single Use Plastics
% reduction vs 2021 Baseline Eliminate 100% (Ofces)
Reduce by 10% (Sites)
a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities
in line with its strategy and risk management process
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Task Force on Climate-related Financial Disclosures continued
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Board and
senior
management
incentives
Through our incentives programme we continue to embed a net-zero
mindset and ownership of our climate response and new energies
performance across the Board and Executive leadership.
Targets are set by the Remuneration Committee each year, taking into
account a number of internal and external reference points, including the
Company’s key strategic climate response and new energies objectives for
the year (further detail is provided in the Remuneration Committee section of
this report).
The reward structure is aligned to our risk management framework and
the delivery of critical long-term strategic goals. For FY2022, these goals
included:
• Promoting sustainability – greenhouse gas intensity reduction
• Energy transition – revenue from new energies
Line management ownership of our climate response and advance our
energy transition strategy is also promoted through a broader range of
business and project-specic KPIs in senior management goal plans, that
in addition to the above also include: progress with site decarbonisation,
Carbon Disclosure Project CDP rating score, new energies business and
capability development, and TCFD recommendations compliance.
DISCLOSURE
LOCATION
Pages 25-27; 31 Disclosure level: Partial
1 The assurance was conducted in line with the requirements of the AA1000 Assurance Standard v3 (2020). The Type 2 moderate level of assurance process was
applied. Type 2 Assurance: an engagement in which the assurance provider gives findings and conclusions on the principles of Inclusivity, Materiality, Impact and
Responsiveness, and verifies the reliability of specified sustainability performance information. Moderate level of assurance: Implies assurance provided based on
the ‘limited’ evidence which is compiled from internal sources and parties.
RECOMMENDATIONRECOMMENDATION RESPONSERESPONSE
DISCLOSURE LOCATIONDISCLOSURE LOCATION
StrategyMetrics and targets
a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities
in line with its strategy and risk management process continued
Task Force on Climate-related Financial Disclosures continued
b) Disclose scope 1, scope 2 and, if appropriate, scope 3 greenhouse gas emissions and the
related risks
c) Describe the targets used by the organisation to manage climate-related risks and
opportunities and performance against targets
Our own
operations
We report scope 1 and 2 greenhouse gas emissions resulting from our
operations and each year submit to the Carbon Disclosure Project (CDP),
this data is included in the Environmental section of this report. We also
calculate our carbon footprint and energy consumption in accordance with
the new UK Streamlined Energy and Carbon Reporting regulations, and our
data is assured¹.
DISCLOSURE
LOCATION
Pages 32-34
Our value chain We recognise that the emissions from our value chain are a material part of
our carbon footprint and, in 2022, we extended our Scope 3 programme to
better understand the related decarbonisation challenges and opportunities.
The assessment of scope 3 emissions is included in the Environmental
section of this report with an explanation of category selection. In 2022
we, for the rst time, use sold products, which gives us a more holistic
understanding of the true GHG impact of our business and its operations.
DISCLOSURE
LOCATION
Page 35 Disclosure level: Full
Sustainability
Net Zero targets
In 2020 we committed to transition to a lower carbon business. To this end,
we aim to reach Net Zero in our Scope 1 and 2 emissions by 2030 and are
promoting decarbonisation across our supply chain. 2020 is our base year
against which our Net Zero (and Interim Targets) are measured from.
Targets cover our main decarbonisation levers and include:
• Energy supply changes – progressively transition to 20% renewable
energy by 2023, and 50% by 2030.
• Energy efficiencies – 30% energy consumption saving by 2030.
• Emissions reduction – Our aim is to deliver a 25% reduction in emissions
by 2030.
DISCLOSURE
LOCATION
Pages 32-34 Disclosure level: Partial
Further metrics will be developed as
our climate response programme and
disclosure matures in 2023.
PETROFAC LIMITED | Annual report and accounts 2022
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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C_GEN Section
Social
Gender profile of our people (%)
Our performance
Why it is
important to our
business model
and strategy
As a service business, it is our
people, their attitude and skills who
set us apart from our competitors.
We are therefore committed to
building a diverse workforce, which is
representative of the communities in
which we operate, while developing
all our people, keeping them safe,
and looking out for their wellbeing.
Wherever the Company operates,
we are committed to creating
shared value, by engaging with local
communities, investing in local supply
chains, employing local people, and
stimulating local economies. As well
as being the right thing to do, we see
the creation of in-country value (ICV)
as a source of competitive advantage,
helping us to build strong client
relationships and bid on challenging
projects, while beneting from the
economies of delivering locally.
We operate in challenging
environments, where the rights and
welfare of workers can sometimes be
at risk. We are committed to protecting
human rights throughout our business
operations and extended supply chain,
ensuring that everyone who works with
and for us are treated with respect,
fairness, and dignity.
Links to the SDGs
Male 85%
Employees
Female
Male 92%
Leadership
2022 0.018
2021 0.018
2020 0.013
Lost time injury frequency rate (%)
Age profile of our people (%)
<30 10%
30-39 30%
40-49 33%
50-59 21%
>60
6%
Grade profile of our people (%)
11%
26%
45%
16%
2%
15%
Executive
Management
Supervisory
Professional
Support
2022 0.094
2021 0.091
2020 0.065
Recordable incident frequency rate (%)
Spend on local goods and services¹ (%)
2022 32%
2021 54%
2020 53%
1 Non-JV Projects
We have set a target of 30% of
women in senior management
roles by 2025
Zero workplace-related fatalities
in 2022
Purchased US$345 million worth of
goods and services locally
Female 8%
PETROFAC LIMITED | Annual report and accounts 2022
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Health, safety and security
Whatever their role and wherever they work, we want
everyone involved with Petrofac to feel safe, valued,
and cared for. Ultimately, our aim is for zero safety
incidents, which we see as an entirely realistic goal.
Our overall safety record is among the strongest in the
industry and, having emerged from two challenging years
dominated by the Covid-19 pandemic, 2022 brought a
sustained safety performance across our global operations.
The emphasis for the year was to implement our refreshed
health, safety, and environment (HSE) strategy, ensuring that
the same uncompromising safety culture exists across the
entire Group, and the same impeccable standards are applied
on every site. As the Group returns to growth, we expect
that this commitment will help us to improve on an already
strong safety performance, and attention to the wellbeing of
employees will be a characteristic of the Petrofac culture.
HEALTH AND SAFETY
A focus for 2022 was the roll-out of a refreshed HSE strategy,
which is based around five pillars:
1. Leadership: the shadow you cast
2. Employee engagement: greater engagement,
fewer incidents
3. Contractor management: consistency and
performance driven
4. Training: formalise, simplify, and standardise,
with a refreshed learner experience
5. Compliance: do it right, first time
The major themes of the strategy include:
• Data-2-Decisions – using data and analytics from key
leading and lagging indicators to define areas of focus and
reduce incidents
• Technology enabled – extensive use of mobile technology
to increase situational awareness
• Engagement and communication – engaging, insightful,
focused and even fun
• Proactive vs. reactive – observations and interventions
before an incident occurs
• Accountability – the joint ownership of HSE performance
by line management and the HSE function
This began to deliver an improvement on an already strong
performance, along with a re-energised approach towards
health and safety.
Reflecting on our 2022 performance
Across our main performance indicators, we were pleased
to deliver another strong safety performance across the
organisation:
• Zero workplace-related fatalities
• Lost time injury (LTI) frequency rate – remained unchanged at
0.018 per 200,000 work hours, compared to an industry
average of 0.044 (International Association of Oil and Gas
Producers 2021)
• Recordable incident frequency rate – slightly increased to
0.094 per 200,000 work hours, compared to an industry
average of 0.15 (International Association of Oil and Gas
Producers 2021)
As well as seeing a reduction in the number and frequency of
workplace injuries, there was also a decrease in their severity,
with the majority of incidents being classed as minor – typically
involving cuts, scrapes, trips and falls.
Preventing serious injuries and ensuring the workplace remains
fatality-free remains our number one priority. Driving continues to
be an area of exposure. Along with our contractors, our people
drive the equivalent of five times around the world each year,
often in challenging environments and, in 2022, the total was
59,498,520 km. We therefore stepped up our programme of
road safety initiatives, including a total ban on night-time driving
for everyone who works for or with our project sites.
Making leadership more visible
With many pandemic-related travel restrictions drawing to a
close, it became easier for our leadership teams to demonstrate
the Petrofac HSE ethos. With regular site visits from HSE leaders
and the Executive team, and daily walkarounds by project
leaders, there was a clear and visible commitment to HSE on
all of our projects. Our sustained strong set of results in 2022 is
testament to us avoiding any lingering effects from the Covid-19
pandemic on our safety performance.
PETROFAC LIMITED | Annual report and accounts 2022
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Increasing employee engagement
and communication
To deliver on our HSE ambitions, we want the topic to be forever
top of mind among the entire workforce. To ensure that our
people are proactively and routinely engaged in health and safety,
we introduced a number of digital and mobile tools. For example:
• HSE dashboards – all employees are given access, via their
mobile phones, to real-time safety performance, which is
available at the project, country, and business unit level.
This helps us to raise awareness of our safety performance,
demonstrate that everyone at every level is accountable,
and keep the entire organisation focused on improving
performance.
• HSE observation reporting tool – a mobile app, available
to all employees, enabling them to report any safety
observations, both good and bad, via their mobile phones.
In 2022, we saw a 470% increase in the reporting of safety
observations, with over 140,000 observations reported. This
new app helps us to keep employees engaged, as well as
providing useful insights and leading indicators of potential
issues.
• HSE social networking – we use the Yammer platform to
host an HSE social networking dialogue, which involves
everyone in the HSE team and is open to anyone in the
Company. With more than 350 active members, this is the
second most active such group in Petrofac.
• Driving improvement app – we replaced many of our
in-vehicle monitoring systems with a mobile app, available to
all employees. As well as keeping track of their driving
behaviour, allocating a score, and providing personalised
road safety advice, it enables everyone to see how their
driving performance compares to their colleagues.
Keeping a focus on health and wellbeing
One of the dividends of the pandemic was an increased focus
on employee wellbeing, and this was stepped up further in 2022.
We delivered several all-employee health webinars and internal
campaigns covering both physical and mental health, which
generated high levels of engagement across all of our offices and
project sites globally. The webinars included sessions on: Eat
Healthy Stay Healthy, Positive Mental Health Practices, Ramadan
Health, Heart Health, Mental Health Awareness, and Breast
Cancer. Meanwhile, the internal campaigns included: Cut the
Sugar Challenge, Sharjah Family Health Day, World Happiness
Day, Health and Safety Day stretching programme, Heat Stress,
a blood donation campaign, and a flu awareness campaign.
In addition, our Company Doctor runs an online Wellness
Wednesday programme for all employees. A campaign was
launched to ensure that all our onsite employees have a regular
medical examination, and everyone is encouraged to participate
in exercise and fitness sessions, such as yoga and cycling.
We also extended our mental health awareness initiatives.
After successfully piloting our approach in the UK, we rolled
the initiative out in Sharjah, where 24 newly trained Mental
Health First Aiders helped us to draw attention to mental health
issues and reduce the stigma that traditionally surrounded
them. By having dedicated and knowledgeable people to talk
to, our employees can feel safe discussing their concerns
and experiences. The aim is that any emerging issues can be
addressed and resolved before they become severe.
Improving situational awareness and
increasing employee engagement
remain key deliverables of our HSE
strategy. We are delighted to have
delivered a year free of work-related
fatalities in 2022.”
JIM ANDREWS
Group Head HSE & Quality
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Awareness
PetrofacGo Observation App
• A new digital tool
• Increases awareness
• 11,957 observations within the rst eight months
• Engages more employees
Right across Petrofac, we have
been introducing mobile and digital
technologies to help us work better,
faster, and smarter.
Through our award-winning platforms,
like Petrolytics and Connected Worker,
we have digitalised our services, saving
clients time and money. With our
new Emissions Dashboard we have
increased the visibility of environmental
factors and brought them into the day-
to-day decision process of our clients.
We have also been using mobile and
digital solutions to improve our internal
operations and achieve our strategic
focus on best-in-class delivery.
Whatever their role and wherever they
work, we want everyone involved with
Petrofac to feel safe, valued, and cared
for – and that means we put a big
emphasis on all HSEQ topics.
We already have a strong safety culture,
we perform well ahead of industry norms,
and we are determined that Petrofac
should be among the safest places to
work in any industry or region.
We therefore want HSE to always be
top-of-mind for everyone. To this end,
in 2022, we introduced a new PetrofacGo
Observation App, asking every employee
to download it to their mobile devices,
and share at least two HSE-related
observations with the Company
every month.
The observations can be good or bad – good hygiene behaviour,
for example, or a trip hazard in an ofce. Either way, they help us
to keep employees engaged, celebrate a strong safety culture,
and give us early warning of potential issues.”
LYNN HOBBALLAH
Global Head of Health and Safety
HEALTH AND SAFETY
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SECURITY AND CRISIS MANAGEMENT
Remaining responsive to a fast-changing
security environment
Petrofac works in challenging environments with fast-changing
security issues. Our aim is to protect our employees and assets
in a responsible manner, and to prevent any security-related
disruption.
Our security and crisis management teams are closely integrated
into the wider HSE community. Our Security and Crisis
Management Policies set out the responsibilities of our senior
management team and our business units.
Refreshing and renewing
In the wake of the Covid-19 pandemic, and in response to
the changing geopolitical situation, the Security and Crisis
Management function continued to review approaches in our
existing projects and incorporate the lessons learnt around digital
and remote working technologies.
We also took on board valuable lessons learnt during the
pandemic. Our traditional three-tier crisis management system
was evolved into a fully digital platform, bringing new efficiencies,
and reducing the burden on any teams working in a crisis
situation.
Looking ahead to 2023
The focus for 2023 is to support teams working in new and
potentially challenging geographies, such as the recent contract
awards in Africa and Gulf of Mexico. Given the healthy bidding
pipeline, we also expect to support an increase in project delivery
in our traditional core markets.
CYBER-SECURITY AND DATA PROTECTION
Remaining vigilant and bringing
incremental improvements
Given the rapidly evolving cyber-security risks, and to support
Petrofac’s wider digitalisation initiatives, cyber-security and data
protection continued to be an area of focus.
Increasingly, our cyber-security disciplines and protections are
audited by clients and regulatory bodies, and in all cases, we met
or exceeded their requirements.
During 2022, in response to the increased complexity and
frequency of cyber-attacks across the commercial world, we
re-evaluated our controls, particularly those related to our cloud-
based platforms and applications, and continued to monitor
and address any supply chain risks. Meanwhile, we continued
to align our information security management practice with the
ISO27001 standard and other best practices.
Related initiatives included:
• Enhancing our internal awareness programmes, with
particular attention on the risks posed by phishing and social
engineering, drawing attention to the increased sophistication
of such attacks, while also running simulation tests and
enhancing our related controls
• Continuing to enhance our threat detection and threat-
hunting capabilities
• Continuing the assessment of cyber-security risks with
regular vulnerability assessments, penetration tests and Red
Team exercises
Meanwhile, cyber-security remained a key priority in all our
digitalisation initiatives, and we ensure that appropriate security
protection is embedded from the initial idea and conceptual
phases.
Evolving our HSE training programmes
We renewed our commitment to HSE training, with an emphasis
on engaging and interactive training techniques, as well as
continuing professional development. During 2022, 12 of our
HSE team members enrolled in the National Examination Board
in Occupational Safety and Health (NEBOSH) General Certificate
programme, and more than 50 employees became certified
mental health trainers.
Setting out our 2023 priorities
For 2023, we will continue to embed our five-pillared HSE
strategy and, with a busy bidding pipeline, we will put renewed
emphasis on project start-up preparations. We will be
implementing Start Strong campaigns on all new E&C projects,
which set the tone and ensure that a strong safety culture is
established from the outset. Given that the majority of onsite
personnel are not directly employed by Petrofac, we will also
focus on contractor management, including Contractor Safety
Forums at all new projects and Safety Hotspot training for their
respective employees.
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QUALITY AND ASSET INTEGRITY
An important part of the ethos at Petrofac is to ensure
that we operate predictably and efficiently, and the
energy facilities we design, build, and operate are
inherently operable and safe and they meet or exceed
their operational purpose. A disciplined approach
to both quality and asset integrity are therefore
embedded into the way we work.
QUALITY
At Petrofac, our quality strategy responds to the rapidly changing
operating environment we work in. We apply a disciplined
and consistent approach to quality management and aim for
continual improvement. In addition to the Petrofac values, our
Quality team focuses on three additional values: to be consistent,
client-focused, and diligent in the work they perform.
Beyond compliance
Since it was first established in 1995, our robust Quality
Management System and ISO9001 certification has helped us to
build long-standing client relationships. It also reflects our ability
to provide a quality of service that meets customer expectations
as well as regulatory requirements.
Looking ahead to 2023
In 2023, we will refresh our quality strategy to focus more on
issue prevention, to become even faster on issue resolution
at the times we encounter defects, and to drive continuous
improvement within our project delivery.
Initiatives planned for the year include: to design a new, best-in-
class, Group-wide lessons learnt platform; to establish a Global
Management System; to improve our inspections processes; and
to further reduce our projects’ costs by improving our processes.
ASSET INTEGRITY
We generally work with high-hazard facilities. Maintaining the
right mindset, backed up by disciplined processes and controls,
is therefore critical to our success – as well as the safety of our
people and our clients.
In 2022, the Group was responsible for managing and ensuring
the integrity of 14 operating assets as the Installation Operator,
as well as seven separate portfolios of wells as the Well Operator.
In 2022, a significant recognition of our capability in managing
high-hazard assets was the award by the Australian
Government’s Department of Industry, Science, Energy and
Resources for the contract to take over operatorship of
the Northern Endeavour FPSO. This involves the safe and
environmentally sound decommissioning and removal of the
FPSO and its associated infrastructure.
Meanwhile, in the UK North Sea, we worked to enable the
operation of the Anasuria FPSO to be taken over by its new
owner, the Anasuria Operating Company. We are providing the
necessary people and processes as part of a new five-year
Integrated Services Provider contract.
We also embarked on new decommissioning operations in
the Gulf of Mexico. Here, our expertise in safely managing
assets, especially late-life assets, will enable us to make
safe nine offshore platforms and 200 wells as part of their
decommissioning.
Our asset integrity work also informs our wider operations,
including our approach to designing, building, commissioning,
and completing projects. With a renewed demand among clients
for integrated service offerings, our asset integrity expertise
positions Petrofac to provide more managed integrity services.
Reflecting on our 2022 performance
In evaluating our asset integrity performance, our main area
of focus is managing process safety hazards, reducing high-
potential incidents (HiPos) and those incidents that involve
process safety procedures.
In 2022, as in 2021, we had no HiPos that could have had
escalating, process safety-related outcomes. However, we did
conduct a small number of serious investigations into possible
precursors of a failure to follow asset integrity procedures.
Getting value from our suite of digital tools
As with other areas of the HSE function and the wider business,
we extended our use of digital tools during 2022. These help us
to maintain our leadership commitment to asset integrity, engage
more of our people with the value created, refine and simplify our
asset integrity KPIs, and extend the learnings from our regular
programme of investigations and audits.
These included:
• Asset integrity dashboard – we continued to develop this
KPI monitoring tool to enable clearer focus on cumulative
asset integrity risks.
• Remote asset integrity reviews – while the end of
Covid-19 restrictions enabled a return to physical site reviews
we adopted a blended approach, continuing to conduct part
of the review remotely. This employs remote methodology
using digital records, video conferencing and real-time
camera tours of sites that have sufficient connectivity.
• Connected Worker – digital workflows were developed for
key process safety processes using our Connected Worker
technologies. This enabled us to streamline the execution of
processes as well as the way they are monitored by
supervisory teams.
Going forward, and enabled by meaningful real-time data,
these tools will enable us to target our assurance activities
more efficiently, based on an accurate and up-to-date
understanding of the true condition of each asset.
PETROFAC LIMITED | Annual report and accounts 2022
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People
From the people perspective, 2022 was a busy
year for Petrofac.
A return to higher oil prices resulted in a much tighter labour
market across the global energy industry and, given the quality
of our teams, we had to work hard to retain talent, and ensure
that our people feel engaged and appreciated. Meanwhile,
as we prepare for growth, we introduced several new talent
acquisition initiatives and externally hired more than 2,300
people in a very competitive labour market.
• Voluntary attrition levels were higher than we would have
liked, at 14.3%. Overall, employment levels fell to 7,950
people, representing a 3% decrease on 2021.
Preparing the Group for sustained growth
One of Petrofac’s key strategic themes is to return to growth
and, given the increase in bidding activity throughout 2022, we
introduced several new talent acquisition initiatives, such as:
• Appointing a new Head of Global Talent Acquisition
We appointed our first Global Head of Talent Acquisition. With
overall responsibility for all recruitment at Petrofac, she is
charged with improving the candidate experience, enhancing
the employee value proposition, improving our recruitment-
related social media activity, and building our employer brand.
• Adding a new careers portal to petrofac.com
To support our talent acquisition drive, we introduced a new
careers portal to petrofac.com. This helps us demonstrate
that, besides offering rewarding work and good career
prospects, Petrofac is a people-based business that cares
deeply about personal and professional development, has a
culture that embraces diversity, and is a leader in
safeguarding the safety and wellbeing of our people.
• Reflecting the communities in which we operate
Another Petrofac characteristic is our local delivery model.
We want our teams to be representative of the communities
in which we operate, and the recruitment of local nationals
was an important theme of our 2022 recruitment activity. We
hired 39 Omanis, taking us to an all-time high of 259 Omani
employees. We also hired 16 Emirati nationals taking us to a
total of 68 Emiratis by year end. Several local team members
were also hired to support our operations in Algeria, Libya,
Lithuania, and Thailand.
• Welcoming former employees back to Petrofac
One of our most successful recruitment initiatives was to
proactively contact many of our former employees and
encourage them to return to Petrofac – which is something
that around 200 people chose to do (see page 57).
• Helping engineers overcome career break bias
We formed a partnership with the UK-based scheme, STEM
Returners, to help engineers get back into work after a career
break. The aim is to source people with skills across multiple
engineering disciplines, offer them fully paid placements in
our Aberdeen offices, and help them reintegrate into an
inclusive work environment. As well as helping us to identify
people with demonstrable skills and life experience, this
scheme also helps us to promote diversity and inclusion.
• Attracting and developing the next generation
of engineers
Creating a new generation of talent is another priority for the
Group. We restarted our UK-based graduate scheme,
appointing around 20 newly qualified engineers,
half of whom are women.
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Making more progress on diversity and inclusion
In 2022, we further increased our focus on diversity and inclusion,
building on past achievements, introducing new initiatives, and
achieving recognition for our progress.
Although we have a long way to go, we are committed to being
a more diverse company, which embraces differing perspectives,
is representative of the communities in which we operate, and
provides equal opportunities to all employees and job applicants.
Key developments and achievements include:
• Achieving a better gender balance
Given the nature of our business and the location of many of
our operations, achieving a better gender balance is a
challenge.
One focus is our senior management positions. In 2022,
women accounted for 26% of our senior managers, up from
6% in 2018. We have a target to reach 30% of women in
senior management by 2025.
As well as building diversity from within, we mandate that at
least one woman is included on the final interview shortlist for
all external recruitment into middle and senior management
roles. Since 2020, the proportion of women recruited externally
into senior management roles has increased from 6% to 21%
in 2022. As a result, we were able to appoint several highly
qualified women to senior level positions in 2022, such as
Group Head of Talent Acquisition, Group Head of Quality, and
Group Head of Environment and Sustainability.
Across the Group as a whole, the proportion of women
employees increased from 8% in 2018 to 15% by the close of
2022 – which is a move in the right direction.
• Giving voice to diverse viewpoints
To ensure that the Company hears and engages with a wider
spectrum of viewpoints, we added to the number of global
Employee Network Groups.
In 2021, we established a Women’s Group, called SHINE,
which now has almost 400 members, and an LGBTQ+
Group, called Pride, with 80 members. Both are sponsored
by an Executive team member, provide a safe space for
under-represented groups to share experiences of working
in the energy sector, offer mentoring opportunities, and host
sessions to increase confidence and promote development.
Both groups have been successful, as reflected by the fact
that they won the Diversity & Inclusion Initiative of the Year
category at the 2022 UK Engineering Construction Industry
Training and Development Awards.
Building on this experience, we introduced two new
Employee Network Groups in 2022. One, called Aspire, is
for young professionals, to help them build connections
within the Group, exchange experiences, understand training
and development programmes, and access mentoring
opportunities. The second, called Engage, is for older workers,
to help them explore how they may want their career to evolve,
when and whether they may want to consider a phased move
into retirement, how the Company can make better use of their
experience, and the type of encouragement and mentoring
they can offer to younger employees.
• Supporting employees affected by menopause
In 2022, we signed up to the Menopause Workplace Pledge.
This means that we are committed to taking positive action to
support employees going through menopause.
• Putting even more emphasis on Emiratisation
Active in the United Arab Emirates (UAE) for 30 years,
Petrofac has major centres in Abu Dhabi and Sharjah which,
together, are home to around 3,000 people. In line with our
local delivery ethos, and the UAE Government’s Emiratisation
agenda, we are keen to employ more local nationals at every
level of the organisation. However, with Emiratis making up
just 10% of the total UAE population and occupying 1% of its
private sector jobs, this can be a challenge.
We are already an acknowledged leader – for example, the
Ministry of Human Resources and Emiratisation recently
ranked Petrofac as the best private sector company in the
energy industry for Emiratisation, and third overall, just behind
the Abu Dhabi National Oil Company and the Emirates
National Oil Company. We also appointed our first ever
Emiratisation Manager in 2022.
This role will work closely with our Talent Acquisition team to
source more local Emirati talent, and we now have our highest
number of Emirati employees at 68. They will also work with
our Emirati staff to provide coaching and mentoring, and
discuss career development opportunities.
Embedding our new operating model
As part of the rebalancing and reshaping of Petrofac, a new
operating model was established. As part of this, a single
technical services and assurance function, called 1tec, was
created, which brings together all of Petrofac’s engineering
knowledge, insights, and experience, and ensures they are
applied to every project and assignment anywhere in the world.
A communications programme was launched to help embed
the new ways of working, and explain how 1tec is set up to
collaborate with colleagues from across the Group, and provide
clients with consistent and predictable service.
Investing in training and development
We continued to evolve our training and professional
development programmes, including our early career education
initiatives, our Leadership Excellence Programme and our
Petrofac Academy online distance learning programmes.
Highlights of the year included:
• Welcoming back our second cohort of
Master’s graduates
In 2020, one of the ways we responded to the
Covid-19 pandemic was to work with the American University
of Beirut to sponsor a first-of-its-kind Master’s programme
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,
in Engineering Management. We offered talented young
engineers the opportunity to join the programme, with Petrofac
paying tuition fees and covering subsistence costs. The first
cohort of 46 students graduated in 2021, with the second
cohort graduating in 2022.
• Participating in Oman’s prestigious Etimad programme
Five of Petrofac’s Omani female employees completed the
2022 Etimad National Leadership Programme. Aligned with
Oman’s Vision 2040 development programme, this
prestigious country-wide initiative is intended to help
transform the Sultanate into one of the world’s most
developed nations.
In total, around 200 Omanis nationwide were selected to
participate from across different sectors, such as technology,
communications, transportation, logistics, construction, and
energy. The three-month programme sharpens the leadership
and supervisory skills of Omani nationals in middle and senior
management positions working in the private sector.
Focusing on employee engagement
We have a number of mechanisms and programmes to support
and monitor employee engagement, build on strengths and
address concerns. For example:
• Maintaining an open, two-way conversation
One of the ways we engage with and hold conversations with
our workforce is our Petrofac Workforce Forum. Established
in 2019, the Petrofac Workforce Forum (PWF) builds on the
framework set out in the UK Corporate Governance Code.
Meeting with the Board and the Executive team twice a year,
the PWF comprises 12 employee representatives from across
the Group.
The PWF enables the Board and the Executive team to
understand the mood of the workforce, better understand
their ideas, concerns, and perspective, ascertain what it is
about Petrofac that motivates and engages them, plus allows
them to ask questions of the Board. 2022 marked the end
of the three-year term of the first PWF representatives, and
company-wide elections were held early in the year for the
second term. It is seen as a successful initiative and has a high
profile across the Group.
• Keeping track of attitudes and opinions
Each year we ask our employees to participate in
PetroVoices, our confidential employee engagement survey,
run by an independent third party (Willis Towers Watson). In
2022, the participation rate increased from 65% to 67%, the
Sustainable Engagement score increased from 84% to 86%.
In fact, the scores for all ten main categories improved
year-on-year.
We are charging all senior leaders to produce action plans
for the top three topics in their respective areas. These
plans will be reviewed by the leadership team with a view to
implementing improvements throughout 2023.
Recognising and rewarding our people
It is important to Petrofac that all our people are appropriately
rewarded. Wherever we operate, we want to be seen as a good
employer, offering competitive rates and conditions. Irrespective
of their role, location, or seniority, we want all our people to enjoy
dignified working conditions and a decent standard of living.
Recent initiatives include the introduction of a new recognition
scheme, total reward statements for employees, and reduced
working hours in the UAE. In 2022, 578 employees received a
monetary recognition reward, and several additional changes
came into force – such as enhanced healthcare benefits for
employees in the UAE and improved Life Insurance packages
for employees in India.
Meanwhile, in the UK, we followed through on a commitment
we made in 2021 to pay at least the Real Living Wage to all
employees. In 2022, we were therefore accredited by the Real
Living Wage Foundation which, each year, calculates the hourly
wage that a UK family needs to live on, based on the cost
of a basket of household goods and services. This wage is
considerably higher than statutory requirements. Importantly, the
commitment extends to all UK-based employees and also covers
indirect employees, such as temporary or agency staff, as well as
any interns or placements.
Returning to the
Petrofac fold
Given our plans for a return to growth, combined
with the tight labour market and the intense
competition for skills and experience across the
energy sector, we need to be determined and
creative with our talent acquisition approaches.
One initiative that was particularly successful in 2022
was to proactively contact a number of former employees
and ask them whether they would consider a return to
Petrofac.
Overwhelmed by the positive response, we welcomed
more than 200 people back to the Company. We enjoyed
particular success in our engineering hubs in India as we
ramp-up for expected contract wins.
It’s good for them, as they have been able to return to
a working environment and a culture which, by denition,
they liked and missed.
It’s also good for the Company. After all, these are people
we already know, and who already know the Company,
its ethos, and systems, and can hit the ground running.
And, having experienced the reality of leaving us and
working for other companies in the sector, they tend
to be very strong advocates of Petrofac among their
fellow employees.
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• 4 groups now established
• A voice to under-represented groups
• Won a major award
• Providing a safe space
Petrofac is committed to building
a diverse workforce, which is
representative of the communities
in which we operate. We have made
some ambitious commitments to
increasing equality, diversity, and
inclusion (ED&I). One of the ways
we have given a voice to diverse
viewpoints is our Employee
Network Groups.
We recognise that Petrofac works in an
industry where women and members of
LGBTQ+ groups are under-represented.
So, when we set up our rst two
Employee Network Groups in 2021,
we focused on women and our
LGBTQ+ colleagues.
The aim was to provide safe spaces
where people can network, problem-
solve and mentor each other. The groups
grew rapidly, with almost 400 people in
SHINE, the women’s group, and 80 in
PRIDE, the LGBTQ+ group. They also
led to tangible changes in the way we
operate – like more support for people
returning from maternity leave and the
introduction of a new menopause policy.
In 2022, we won an Equality, Diversity &
Inclusion Initiative of the Year award at
the Engineering Construction Industry
Training Board Awards. We also set up
two additional groups – Engage, for
people who are well-established in their
career, and Aspire, for those in the early
years of their career.
PEOPLE
Diversity
Employee Network Groups
To ensure that Employee Network Groups are a forum
for change, each one has a sponsor from the Executive team.
They are expected to ensure that initiatives are supported
and represented at the highest level. I think most people
would agree that we’ve become a more open and empathetic
company as a result.”
ANNA DOUGLAS
Global Head of Diversity and Inclusion
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Environmental, Social and Governance continued
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Community engagement
Making a positive contribution to our
local communities
Our local delivery model is a key differentiator for Petrofac and,
wherever we work, our aim is for local communities to benefit
from our presence. We therefore engage with local stakeholders
to better understand and manage the social impacts of our
business, address any concerns they may have about our
work, and maximise the benefits we are able to bring to their
communities.
Stakeholder engagement is one of the pillars of our Petrofac
Social Performance Framework, which consists of our Social
Performance Standards and a set of guidelines that enable us to
meet the commitments set out in the Petrofac Code of Conduct,
Petrofac Environmental Policy and Diversity and Inclusion Policy.
The framework begins with social assessment, followed by
community engagement, grievance management and social
investment.
A disciplined approach to social investment
We have a formal social investment strategy and a set of
guidelines to ensure our activities create value for both Petrofac
and the recipients, are conducted in compliance with our Code
of Conduct, and are subject to rigour and transparency.
These guidelines explain that our social investment initiatives
should be aligned with three priorities:
1. Promote STEM education, and improve educational
access and employability.
2. Contribute to community improvement, capacity building
and disaster relief.
3. Support a just transition, as the energy sector evolves
and reduces its carbon intensity.
Any initiatives that we support are subject to a formal due
diligence and regular review process overseen by our
Compliance teams. Following the launch of the updated
guidelines in 2021, we began the process of embedding them
across the business, including training for country managers and
project managers, and this process will continue in 2023.
In 2022, as part of strengthening our wider HSE and Quality
team, we created a new Sustainability Manager role. Having
previously served Petrofac as Lead Civil and Structural Engineer,
the new Sustainability manager has a good understanding of the
inner workings of the Company and its sustainability impacts.
One of her focus areas is social investment.
A round-up of our 2022 investments and initiatives
Apart from the dedicated Corporate and Social Responsibility
representatives across our global operations, several of our
employees – who are passionate about the environment and
social issues – generously volunteer their time to help with our
social investment activity. Initiatives from around the Petrofac
world in 2022 include:
• Algeria – supporting our local communities
Our Tinrhert project teams assisted the nearby village of
Ohanet. They donated provisions for around 500 school
children, such as school bags, books, and stationery, and
sponsored an educational field trip to a local airstrip. Waste
wood and other building materials were also donated to the
local community to use in their homes and farms, for example
as fencing.
Demonstrating our commitment to inclusion, we also
sponsored Algeria’s National Wheelchair Basketball
Association, which is seen as a leader in the sport and
has won multiple national and international awards. The
contribution is directed at promoting sports to young people
with different abilities and challenges.
• Australia – supporting community initiatives
With the scale of our Australian operations ramping up, we
contributed to several community initiatives, including the
Movember men’s health campaign and the annual Salvation
Army Christmas Appeal.
• India – supporting women’s education and employability
There is a regulatory requirement for us to spend at least a
proportion of our net profit in India on social investments,
equating to an investment of approximately US$145,000
in 2022.
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IN-COUNTRY VALUE
2022 32%
2021 54%
2020 53%
% Spend on local goods and services¹
32% (US$345m)
1 Non-JV Projects
2022 31.6
2021 33.0
2020 41.0
Key projects (’000)
Generating economic value in-country
Wherever Petrofac operates, we are committed to creating
shared value by employing local people, supporting local supply
chains, developing local capabilities, and stimulating local
economies.
As well as being the right thing to do, we see the creation of
in-country value (ICV) as a source of competitive advantage. It
enables our local delivery model, helping us to bid on challenging
projects, keep costs down, improve the quality and capability of
local vendors and supply chains, and build stronger and enduring
relationships with local stakeholders.
Alongside shareholder and client value, we regard ICV as one
of the most important outcomes of our business model. We
therefore aim to make a positive and measurable contribution to
the economies in which we operate.
We continued to work with local charities and contributed to
several projects which provide support to schools for blind
children, orphaned children, and those from underprivileged
families. This included the provision of food, school supplies,
bicycles, a new drinking water system, a solar power solution
complete with streetlights, new toilet facilities, and other such
upgrades.
Continuing our efforts to support STEM education, we
provided training to around 2,000 11-to-18-year-olds in
Mumbai’s government schools, helping them to build skills in
problem solving and IT. We also extended our support for the
PanIIT Alumni Reach for India Foundation (PARFI), supporting
a one-year manufacturing technician training programme for
27 young women from disadvantaged communities to prepare
them for employment opportunities. In addition, we provided
scholarships to several promising young adults enabling them
to attend university.
Other initiatives included support for a range of environmental
causes, including a forest plantation project, the refurbishment
of a potable water source, conservation of honeybees, and the
restoration of the grounds of a TB hospital.
• Oman – investing in local facilities
We partnered with our client, OQ8, on social investment
projects nearby to our Duqm project. This included
a US$78,000 contribution, along with our JV partner
Samsung, to an uplift initiative, which enabled the local
community to construct a new venue for its traditional Friday
market.
Petrofac hosted a two-day training workshop in December
2022 to upskill and develop 15 Omani young nationals
considering a career in new energy industries, as part of our
partnership with the Oman Hydrogen Centre. The aim is to
support the Sultanate of Oman in building its capabilities in
the renewable energy sector.
• Thailand – being an active member of the
local community
In the Ban Thung and Ban Ao-Udom communities, adjacent
to our Thai Oil refinery project, several community relations
and youth development projects were sponsored. PPE was
also distributed as part of the area’s Covid-19 defences.
We supported several ‘Big Cleaning’ events, partnering with
the community representatives to clean up neglected areas.
Petrofac employees also regularly engaged with the local
community by hosting cultural events during festivals and
visiting families to donate gift hampers.
• UAE – supporting STEM education and research
We continued to support STEM education at the American
University of Sharjah through a formal Institutional
Advancement Partnership. This included the support of
several key events during the academic year, such as an
alumni reunion dinner, an open day at the College of
Engineering, and an environmental open day. We also helped
the university to deliver a specialist boot camp course for
aspiring engineering students – an Explore, Design and Build,
Mechanical Engineering Boot Camp.
• UK – demonstrating our commitments to diversity
and wellbeing
Several of our UK community engagement initiatives
demonstrated our commitment to diversity and wellbeing. We
sponsored the Grampian Pride event, with members of our
Pride Employee Network Group participating in the parade
and running a stall. We also sponsored the Alba Development
Road Team, Scotland’s only elite all-female cycling team
based in Aberdeen.
Meanwhile, our Great Yarmouth office made a donation to the
Trust STEM Hub, a project which aims to enhance the delivery
of STEM education across the local area, and a donation to
the East Anglia Air Ambulance service.
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Given the nature of our business and the
skills shortage across our sector, much
of our community engagement and social
investment activity promotes STEM
education, and improves educational access
and employability.
In several countries, such as Algeria and Oman,
we operate national training centres, working
with the energy industry to ll skills gaps and
bring world-class education to local populations.
We also support charitable skills and training
initiatives for underprivileged people, including
our projects in India.
In some countries, we also enter into formal
partnerships with universities and other
educational establishments. A good example
is our long-standing partnership with the
American University of Sharjah.
We continued to support STEM education
at the American University of Sharjah, with a
particular emphasis on the energy transition.
The university’s Renewable Energy Research
Center, established in 2017, is backed by
Petrofac, and supports 12 faculty members
and research staff assistants working on
new energies initiatives, such as the remote
monitoring of large solar photovoltaic (PV)
installations, and the design and build of a
solar-powered quadrotor – a type of drone or
unmanned aerial vehicle.
We also sponsor a Research Chair in Renewable
Energy and support several university events
such as its open day, careers fair, and an
environmental day. A highlight from 2022
was helping the Department of Mechanical
Engineering to deliver free Mechanical
Engineering Boot Camps to 15-to-18-year
-olds from across the United Arab Emirates.
When we designed the boot camp, we wanted students to understand
that mechanical engineering can be fascinating and fun. Imagine what
it would feel like to still be in high school but learn to 3D print a quadcopter
or produce renewable energy. By engaging students in these exciting
projects, we were able to build their critical thinking and communication
skills while teaching them how to work within a team. We offered them
an unforgettable campus experience.”
DR MAMOUN ABDEL-HAFIZ
Professor and Head of the Department of Mechanical Engineering, American University of Sharjah
COMMUNITY ENGAGEMENT
• Promoting STEM education
• A focus on renewable energy
• Backing the Renewable Energy Research Center
• Delivering Mechanical Engineering Boot Camps
Support
Partnership with the American
University of Sharjah
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Environmental, Social and Governance continued
geographies, have all impacted our ability to purchase locally.
Notwithstanding, we continued to build the capability of our
supply chain and invest in our local presence.
Indicative examples from across our operations include:
Algeria
Petrofac’s commitment to Algeria is reflected in the scale and
nature of our in-country operations. A full-service engineering
centre in Algiers is supplemented by a busy operations hub
in Hassi Messaoud. In 2022, we prioritised the development
of various partnership models with the Sonatrach Group of
companies and were the first international company to sign an
EPC delivery partnership with a local Sonatrach affiliate (the GCB
company). We continued to enhance our Algerian resourcing,
meaning that, across all locations, more than 80% of workers
were Algerian nationals. We also recruited another 30 full-time
Algerian employees, as well as expanding our leadership and
career development programmes targeting high-potential
Algerian staff.
To further increase the proportion of Algerian nationals working
on our projects, we set up a new contracting framework and
programme which increases local market participation and
opportunities through the project contract, tendering and
contract award process, and integrated 15 new companies into
our bids.
For 2023, we will continue to build on various initiatives with
Sonatrach to firm up new contracting models based on
framework agreements that further improve local content levels
during execution. We will also increase the number of Algerian
suppliers in our database and carry out qualifications to ensure
local suppliers are promoted for use on future projects.
Australia
In 2022, we built on the ICV implementation programme initiated
in 2021, making significant progress in supply chain capability
building to support the Northern Endeavour project, our first large
integrated decommissioning contract. Supply chain capability
Formalising our ICV delivery strategy
The creation of ICV has always been a hallmark of our approach.
We have enhanced and extended our commitment with a formal
ICV strategy based on four levers:
• Employing and developing a world-class national
workforce – strengthening our local teams, making them
more representative of communities they work in, and
enhancing our in-country delivery capabilities
• Building the capacity and technical capability of local
suppliers – understanding the capabilities of local supply
chains, supporting skills development, and promoting
technology transfers
• Sourcing goods and services locally – reducing our
reliance on international supply chains, matching local
suppliers with project opportunities, and improving our
efficiencies
• Investing in our local presence and host
communities – ensuring that our community engagement
initiatives support our local operations, and are closely
aligned with our strategic priorities (see pages 24 and 25)
A three-year implementation plan was agreed, along with
key performance indicators for each of the pillars. We also
agreed targets against each metric that are aligned to the
national priorities and position Petrofac as sector-leading in our
local delivery.
Supporting local economies
In 2022, just taking into account our major non-joint venture
projects (as listed on page 71), where we have direct control
over procurement and subcontracting, we purchased almost
US$345 million worth of goods and services locally, and
supported over 30,000 jobs at our project sites.
The proportion of locally-sourced goods and services decreased
to 32% in 2022, down from 54% in 2021. Despite our best
efforts, supply chain disruptions and the impact on the availability
of goods and services, combined with the limited opportunities
to procure certain high-tech equipment in some new
gaps were identified, and we worked with local suppliers and
subcontractors to meet project requirements and maximise
local delivery. We put project-specific supply chain action plans
in place and used an online database of indigenous suppliers.
This ensured that we were always able to identify and work with
suitably qualified indigenous businesses.
In addition, project-specific Indigenous Participation Plans
were developed to ensure we exceeded the required levels
of Indigenous Participation. We also incorporated these
requirements into third-party contracts, encouraging our
subcontractors to increase the level of purchasing from
indigenous enterprises and maximise the employment of
indigenous people.
Looking forward, we plan to invest in further growth, including
supporting the training and development of local personnel,
developing a graduate intake plan, continuing to partner with
indigenous suppliers, and enhancing local development with
a targeted social investment programme focused on the
communities adjacent to our projects.
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Other highlights of the year included:
• A review of the ICV plans from previous projects, to identify
any demand/supply gaps and develop a supply chain action
plan
• Partnership arrangements with five additional small to
medium-sized enterprises (SMEs) to support capacity
building and develop project-relevant capabilities
• Strengthening Omani middle management and enhancing
gender-equal opportunities, including appointing a talent
manager, talent mapping of existing staff to development
opportunities, and the delivery of over 2,000 hours of training
• Establishing a Memorandum of Understanding (MOU) with
the Oman Hydrogen Centre (OHC) to collaborate on building
capabilities in Oman’s renewable energy sector, particularly in
green hydrogen
UAE
We have been active in the Emirates for more than 30 years,
and have major centres in Abu Dhabi and Sharjah which,
together, are home to around 1,800 employees. In addition,
our Sharjah office serves as an operational hub for many of our
projects, and we routinely source goods and execute large-
scale fabrication works in the UAE for export to our clients
worldwide.
In 2022, we implemented a wide-ranging stakeholder review and
ICV improvement programme involving the Executive team and
department heads. The aim is to ensure that our ICV strategy is
effectively embedded across our entire UAE operations. Priorities
that were identified and are being progressed in 2023 include:
expanding our presence in Abu Dhabi, stakeholder plans focused
on creating differentiated strategic partnerships across our local
value chain, resource capacity building and development, and
mentorship programmes.
In 2023, we aim to further increase our Emirati headcount,
promoting further gender parity and empowerment of local
female staff, and to accelerate the development of our middle
management teams.
Making a significant contribution
to public finances
Through the taxes we pay, Petrofac makes a significant
contribution to the public finances of the local economies in
which we operate.
The total amount paid to governments in 2022 was US$170
million, comprising corporate income tax, employment taxes,
and other forms of tax and social security contributions.
Human Rights
Respecting human rights across our
supply chain
We strive to protect and respect human rights throughout our
business operations and extended supply chain.
Our commitments are set out in our Code of Conduct, and we
work in accordance with our Social Performance Framework,
the UN Guiding Principles on Business and Human Rights,
and the Fundamental Conventions of the International Labour
Organization. We are also proud of our long-term commitment
to the United Nations Global Compact and disclose annually our
progress against its Ten Principles.
However, we acknowledge that the nature of our global
operations and the type of geographies we work in at times
present human rights risks. Our main exposure is in the extensive
supply chains of our large EPC projects, particularly the labour
practices of subcontractors and the recruitment agents and
brokers they use.
India
In 2022, we extended the capability of our local teams, enabling
them to operate almost self-sufficiently throughout a project
execution cycle. This means that our Indian offices can now
act as an operations hub for bids in India and further afield.
We also focused on locally driven business development,
strong partnerships with key stakeholders, and the sourcing of
additional local suppliers and vendors. Once again, we were
close to 100% local content on all our Indian projects, except for
critical and licensor-mandated imported items.
For 2023, we aim to further build our local capacity against
current and future business needs, and to draw on strategic local
partnerships when executing projects in India.
Oman
In Oman, where we have a long history of formal ICV
programmes, we reviewed the national government’s latest ICV
priorities and updated our ICV implementation plan accordingly.
The revised plan, sponsored by our newly appointed Country
Chair, covers the four ICV levers: nationalisation, supply chain
capacity building, local purchasing, and investment.
We also moved into 2,000 square metres of newly refurbished
offices, located in Muscat, which are intended to facilitate the
next stage of Petrofac’s in-country growth in Oman. Hosting
more than 200 team members from Petrofac and client
organisations, the facility includes a range of environmentally
friendly technologies, enabling us to reduce local energy
consumption by 35%.
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Environmental, Social and Governance continued
Conducting in-depth audits
We aim to conduct periodic in-depth human rights audits of
our EPC project sites to assess worker welfare conditions and
identify any labour rights concerns. These comprise:
• Inspecting accommodation – we visit accommodation
camps to check that all workers (who are typically employed
by subcontractors) have safe and dignified living, sleeping,
leisure, and sanitation facilities. Where we have concerns, we
follow-up with the subcontractors, and raise action-trackers
until they are resolved.
• Interviewing workers – interviews are conducted on a
random basis, covering the entire spectrum of the workforce,
to assess and ensure that welfare and human rights are being
respected. Any findings or grievances are investigated, and
we work collaboratively with our subcontractors to resolve
them.
• Assessing the impact on local communities – we aim to
understand the impact that our operations may have on local
communities, including noise and nuisance and the influx of
workers. Regular community engagement is established with
Community Liaison Officers and community representatives.
Any grievances are investigated, and we work with the
relevant parties to resolve them. In 2022, for example, we
conducted such an audit at our Duqm project in Oman,
which involved physical inspections, a dialogue with key
stakeholders and subcontractors, discussions with the onsite
worker welfare committee, and weekly interviews with a
cross-section of workers. Improvement opportunities were
identified related to subcontractor grievance management
and compliance assurance, and an action plan implemented
that subsequently addressed the gaps in our system of
control. We also took the opportunity to remind project teams
of the importance of remaining vigilant, drawing attention to
the findings, especially the importance of effective grievance
processes, and maintaining a regular dialogue with the
worker welfare committee.
From 2023, we will enhance the audit protocol, which is
incorporated into the wider HSEQ audit programme, and provide
further training to audit teams. This will ensure that all projects are
scrutinised for potential issues on a more routine and regular basis.
Refreshing labour rights awareness training
To remind our subcontractors of the importance of worker welfare,
the principles we follow, and the support we make available on
each of our project sites, a programme of labour rights refresher
training was implemented (aligned to the International Finance
Corporation Standard on Environmental & Social Sustainability,
Labour Standard 2). This included the provision of information
campaigns available in multiple languages, such as posters and
discussion topics for toolbox talks with groups of workers.
Maintaining project grievance processes
At each project site, we operate grievance processes, which
are designed to be transparent and accessible, and based
on engagement and constructive dialogue. Workers can raise
complaints and suggestions for improvement either anonymously
or in person, and we engage with all parties to support the fair
and prompt resolution of any issues raised. We continued to
work to raise awareness of these grievance systems and how
to access them.
Giving a voice to workers
In 2022, feedback from audits highlighted the issue that workers
employed by some lower-tier subcontractors still do not feel
comfortable with raising formal grievances. To address this,
we continued to elevate the role of project welfare committees,
enabling these workforce groups to raise concerns and
improvement requests on behalf of their constituencies, without
fear of retaliation. The committees represent an important
component of our commitment to labour rights and a vital
communications channel with the wider workforce. We worked
to ensure that regular monthly meetings are held, that workforce
groups are fairly represented, and an effective dialogue is
maintained between all parties.
Evaluating our performance
Each year, we assess our operations for human rights issues
and take a risk-based approach to addressing any incidents of
modern slavery related to forced and bonded labour, worker
welfare infringements, and other labour rights abuses. This
review is detailed in our annual Modern Slavery Statement,
published in accordance with the UK Modern Slavery Act 2015,
which outlines the steps taken in respect to human rights. This
can be found on our website at petrofac.com.
All third-party suppliers are required to undergo mandatory
human rights and labour rights due diligence screening as
part of prequalification onto our vendor management system.
Furthermore, they are required to read and commit to Petrofac’s
Labour Rights and Worker Welfare Standard. We promote early
engagement and encourage suppliers to undertake screening on
registration, ahead of prequalification. In 2022, for example, the
number of new and existing suppliers within the E&C business
unit, that were positively screened and approved, reached 36%
(1,911 out of 5,349), up from 32% (1,475 out of 4,543) in 2021.
We also review compliance with our standards through our audit,
review, and inspection programmes. Where issues are identified,
we work collaboratively with third parties to support improvement
plans.
In 2022, we took the opportunity to conduct a full review and
refresh of our Human Rights Standard, to ensure that it reflects
evolving regulatory requirements and developments in industry
good practice.
During the year, there were no incidents of modern slavery or
human rights violations reported through our auditing or internal
incident reporting mechanisms. However, we did become aware
of some potential labour rights issues among our lower-tier
subcontractors, primarily involving delayed salary payments. In
all instances, we mediated between our supply chain partners to
facilitate solutions, monitoring the situation until it was resolved.
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Number of substantiated allegations (%)
2022 95.1
2021 98.5
2020 98.9
Governance
Our performance
Why this is
important to our
business model
and strategy
Responsible governance and
ethical business practice are critical
considerations for Petrofac.
As a key stakeholder and a
signicant part of the supply chain in
the industries and countries in which
we operate, we must uphold the
highest standards of integrity and
transparency, and consistently earn
the trust of clients, governments,
partners, and the wider energy
industry.
We therefore recognise the
responsibility and opportunity
we have to enable and embody
ethical behaviours. We take this
commitment seriously and
continue to invest in our people
and processes to ensure that
we live up to it.
Links to the SDG’s
2022 118
2021 125
2020 61
Alleged breaches of the Code of Conduct
reported via Speak Up
98% of employees completed
an annual declaration conrming
compliance with the Code
of Conduct
Speak Up reports continue to
indicate a more transparent Speak
Up culture, in line with market
practice
2022 98.5
2021 97.2
2020 99.3
Proportion of employees with line management
responsibility who completed mandatory Code
of Conduct e-learning
(%)
Proportion of employees who completed
mandatory e-learning (Share Dealing Code,
Standard for the Prevention of Bribery
& Corruption, Code of Conduct)
(%)
2022 33
2021 41
2020 39
Number of employees facing discipline
or dismissal following substantiated
allegations
(%)
2022 752
2021 1,449
2020 997
Number of employees attending training
conducted by the Compliance team (Code of
Conduct, trade compliance, investigations)
(%)
2022 98.16
2021 99.9
2020 100
Proportion of employees who completed an
annual declaration conrming their compliance
with the Code of Conduct
(%)
2022 27
2021 39
2020 21
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Ethical behaviour
and compliance
Over recent years, we have put signicant effort
into reinforcing the importance of ethical behaviour
to our people and have invested considerably in
our related teams, systems and processes.
We operate a three lines of defence structure – comprising
rigorous management, strong governance, and independent
assurance. This ensures that ethical behaviour and compliance
are topics which receive consistent attention and enhancement.
Our approach to compliance is also backed by an unequivocal
Code of Conduct and clearly codied behaviours and values,
and its importance to Petrofac is demonstrated by the frequent
delivery of clear and consistent messages from all tiers of
leadership.
To help us monitor our performance and scrutinise our approach,
we retained the services of the specialist law rm Freeh, Sporkin
& Sullivan to act as a key part of our assurance processes.
Continuing to embed a compliance ethos
across the Group
To ensure that everyone who works with and for Petrofac is
aware of our Code of Conduct, we continued with our ongoing
training and communications programmes.
Everyone at middle management levels and below is required
to complete a Code of Conduct e-learning module annually.
We also introduced a quarterly Lessons Learnt bulletin for
all employees, drawing on reported breaches of our Code of
Conduct, how they have been addressed, and guidelines for how
to behave in challenging or ambiguous situations. Meanwhile,
to complement the communications and frequent messaging
from senior leadership, we continued to focus on fostering more
openness among middle managers and their direct reports,
especially those working in higher risk roles and locations.
Encouraging more people to Speak Up
It is vital that everyone working with and for Petrofac can raise
any concerns they might have, without fearing retaliation, and
have the option to do so anonymously.
The ongoing priority is to encourage more open reporting of
any suspected breaches of the Code of Conduct. This entailed
ongoing training, again targeting middle-level managers, to
promote a strong and healthy Speak Up culture, reinforced by
a top-down cascade to all employees on the importance of
speaking up.
This year the number of Speak Up reports logged reached
118, slightly down on 2021 but remaining ahead of recognised
international benchmarks. We also saw a change in the nature of
reports, with fewer anonymous reports, and a larger proportion
of reports being made in person to managers, rather than
through our online Speak Up platform. All of this demonstrates
that people are comfortable in reporting and discussing their
concerns, which is indicative of an open and transparent culture.
1.
Leadership
and people
2.
Processes
and controls
3.
Assurance
Environmental, Social and Governance continued
Three lines
of defence
Each line in our
defence system
includes a feedback
loop that informs
improvement
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66
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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Continuing to enhance our
investigations function
In many ways, we see the investigations function as the most
important part of our compliance programme. Whenever
concerns are reported, we need to demonstrate that we
respond to them promptly and investigate them objectively
and independently. We therefore ensure that whoever reports a
concern is kept abreast of the outcome and that recommended
actions are implemented in a timely manner.
We also regard an investigation as an opportunity to engage in
a dialogue with everyone involved. In this way, we are able to
equip line managers with the tools they need to identify high-risk
situations, and ensure that their teams remain forever mindful of
the related sections of the Code of Conduct.
Beneting from the recent redesign of the investigations function,
procedures and tools, we were able to monitor our performance
against several key metrics – including the time-to-close of each
case.
Benefiting from enhanced processes
and controls
Following the migration to a new cloud-based due diligence
platform, operated by Dow Jones, we were able to enhance the
way we review and monitor our suppliers and business partners.
In 2022, we closed the issues related to over 4,000 third
parties that had been migrated to the new platform during its
implementation, and began to conduct in-depth due diligence
reviews of new entities at the rate of around 500 per month. With
real-time monitoring, we were also able to respond immediately
to any concerns agged by the platform. As well as mitigating
counterparty risks, this helps us to extend our local delivery
model, by identifying locally-based suppliers, supporting their
onboarding, and ensuring they understand and abide by our
compliance requirements.
Adapting to the new geopolitical environment
Given the challenging geopolitical environment, our compliance
teams ensured that Petrofac complied with the rapidly evolving
sanctions regime and related regulations against Russia. This
involved arrangements related to the safe completion and
handover of our Sakhalin Energy project, and the operation of
the Sakhalin Technical Training Centre.
Since the year end, Petrofac ceased its operations on the
Sakhalin Energy project and has divested its control of and
economic interest in the Sakhalin Technical Training Centre. The
Group no longer has ongoing operations in Russia.
Continuing priorities for 2023
For 2023, the priority is to build on recent achievements and
continue to nurture a culture of openness and transparency
– so that all our people feel comfortable discussing our Code
of Conduct, and all tiers of management understand the right
ways to engage in these discussions and, where appropriate, to
escalate the outcomes.
As we enter new and potentially challenging geographies, we will
continue to apply rigorous due diligence, ensuring that we are
effectively insulated from related counterparty risks.
TAX TRANSPARENCY
Petrofac is committed to ensuring compliance with
the tax laws and regulations of the countries where
we operate. We have an open, cooperative and
collaborative working relationship with tax authorities.
Our Tax Strategy and Tax Policy explain how we approach the
management of our tax affairs (these are available for download
at petrofac.com).
The total amount that we pay in taxes is not limited to the
corporate income tax disclosed within the nancial statements.
It also includes employee and employer taxes and social security
payments, VAT and sales taxes, and other taxes such as
withholding, property and other indirect taxes. The total amount
paid by Petrofac to governments worldwide includes those
taxes which are borne by Petrofac, as well as taxes collected by
Petrofac, but which are recoverable from tax authorities or clients
and suppliers.
We report our taxes paid and collected on a cash basis, except
for VAT and sales taxes, which are shown on an accrual basis.
We believe this is the most meaningful way to demonstrate our
annual tax contribution.
It is vital that everyone working with or for
us can raise concerns that they might have,
without fear of retaliation, and have the option
to do so anonymously.”
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Segmental overview
2022 1,311
2021 (restated)
2
1,952
2020 3,090
Revenue (US$ million)
Engineering &
Construction
Business performance EBIT
1
(US$ million)
Business performance EBIT
1
(US$ million)
Business performance EBIT
1
(US$ million)
2022 (299)
2021 (restated)
2
(62)
2020
79
Business performance
EBIT margin
2022 (22.8%)
2.6% 2020
Group revenue
contribution (2022)
50%
Group revenue
contribution (2022)
45%
Group revenue
contribution (2022)
5%
Headcount at
31 December 2022
3,400
Headcount at
31 December 2022
4,000
Headcount at
31 December 2022
250
Revenue (US$ million)
2022 1,158
2021 1,111
2020 933
Asset
Solutions
2022 60
2021 74
2020 50
Business performance
EBIT margin
2022 5.2%
2021 6.7%
2020 5.4%
Revenue (US$ million)
2022 137
2021 50
2020 110
Integrated
Energy Services
58 2022
(6)
2021
2020
(30)
Business performance
EBIT margin
2022 42.3%
2021 12.0%
2020 27.3%
Revenue EBITDA
1
EBIT
1
US$ million
For the year ended 31 December 2022 2021
2
2022 2021
2
2022 2021
2
Engineering & Construction 1,311 1,952 (287) (38) (299) (62)
Asset Solutions 1,158 1,111 70 84 60 74
Integrated Energy Services 137 50 109 21 58 (6)
Corporate, others, consolidation
adjustments and eliminations (15) (75) (18) (11) (24) (18)
Group 2,591 3,038 (126) 56 (205) (12)
Revenue growth EBITDA margin EBIT margin
%
For the year ended 31 December 2022 2021
2
2022 2021
2
2022 2021
2
Engineering & Construction (32.8) (36.8) (21.9) (1.9) (22.8) (3.2)
Asset Solutions 4.2 19.1 6.0 7.6 5.2 6.7
Integrated Energy Services 174.0 (54.5) 79.6 42.0 42.3 (12.0)
Group (14.7) (25.5) (4.9) 1.8 (7.9) (0.4)
1. Business performance is shown by Petrofac as a means of measuring underlying business performance (see note 4 of the
consolidated financial statements).
2. The prior year numbers are restated as detailed in note 2.9 to the consolidated financial statements.
2021 (restated)
2
(3.2%)
PETROFAC LIMITED | Annual report and accounts 2022
68
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Engineering &
Construction
The Engineering & Construction (E&C)
division delivers onshore and offshore
engineering, procurement, construction,
installation and commissioning services.
Lump-sum turnkey is the predominant
commercial model used, but we also
offer our clients the exibility of other
models. The division has more than
40 years’ track record in designing
and building major oil, gas, rening,
petrochemicals and new energies
infrastructure projects. In 2022, Petrofac
was named as one of the top three EPC
companies in Oil & Gas Middle East
magazine.
Operational performance
2022 has been a challenging year operationally,
as we progressed with the completion of the
legacy Covid-19 affected portfolio of projects.
Seven of the active lump-sum contracts
were completed or substantially completed
1
during the year, with ve of the remaining eight
scheduled to be completed in 2023. However,
due principally to the extended impact of the
Covid-19 pandemic on the scheduling and
scope of work on these projects throughout the
year, additional costs have been incurred, which
cannot be fully recovered from our clients.
Similarly, on the Thai Oil Clean Fuels project,
where we are jointly liable with our partners for
performing the contract, due to the scale and
complexity of this project, the scheduling and
additional work required to complete the project
has been affected even more by the knock-on
impacts of the pandemic. As a result, we have
recognised an increase in costs, driven by a
reassessment, with the partners, of the forecast
costs to complete the project. Petrofac will
continue to work closely with its partners to
pursue the recovery of costs over the course
of the contract and, in addition, seek to realise
other portfolio upsides.
Despite these challenges, we have continued
to execute projects to our high standards and
deliver projects to clients that maintain our
reputation for execution.
Energy transition
In offshore wind, we entered into a collaboration
with Hitachi Energy in June 2022 to work
together to provide joint grid integration and
associated infrastructure to the rapidly growing
offshore wind market. Petrofac brings to the
partnership its EPC and installation capabilities,
developed from executing major projects in
the sector for more than a decade, having
successfully delivered the BorWin 3 platform
and the HZK Alpha and Beta platforms, with
the Seagreen offshore wind project close to
completion.
Preparing for the upcycle
In 2022, E&C has successfully positioned
itself for growth in anticipation of the expected
upcycle. It has restored relationships with
key clients in the UAE where there is a strong
pipeline of opportunities. Through the reshaping
and strengthening of the delivery functions,
along with further right-sizing of the business,
whilst maintaining capability, E&C has enhanced
its operational and functional excellence, and is
well-placed to execute new projects as they are
awarded at industry-leading margins.
Financial performance
Revenue for the year decreased 33% to US$1.3
billion (2021 restated: US$2.0 billion), reecting
the lower levels of activity compared with the
prior year. Full year EBIT was a loss of US$299
million (2021 restated: US$62 million), reecting
the impact of further unrecovered cost overruns
in the legacy portfolio, cost increases on the Thai
Oil Clean Fuels contract and adverse commercial
settlements.
1. Completed and substantially completed contracts: contracts
where (i) a Provisional Acceptance Certificate (PAC) has been
issued by the client, or (ii) transfer of care and custody (TCC) to
the client has taken place, or (iii) PAC or TCC are imminent and
no substantive work remains to be performed by Petrofac.
ELIE LAHOUD
E&C Chief Operating Ofcer
Backlog at 31 Dec 22 by country
Lithuania 30%
Thailand 24%
Algeria 22%
Oman 6%
Libya 6%
Iraq 3%
Others 9%
US$1.6bn
Backlog at 31 Dec 22 by market
Refining 58%
Upstream gas 28%
Upstream oil 12%
New energies 4%
US$1.6bn
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Resilience
Duqm Refinery
• US$2.2 billion total project value
• 50/50 joint venture with Samsung Engineering
• 230,000 barrels a day – doubling Oman’s total rening capacity
• 2,000-acre footprint
Global rening capacity looks
set to continue to expand in the
coming years, and we have built
good credentials in the market,
with prestigious projects in the
Middle East, Southeast Asia, and
Central Europe.
We have an established track
record in designing, building, and
commissioning large, complex
reneries. We also have signicant
experience in supporting clean fuels
rening projects as clients transform
existing facilities to produce higher
quality and more environmentally
friendly transportation fuels.
A key milestone for Petrofac was the
initial ‘coming to life’ of the vast Duqm
Renery in Oman. During 2022, all the
key milestones were achieved including
the introduction of water and natural gas,
ring of the auxiliary boilers, inauguration
of the main administration building,
opening of the Central Control Room
and the lighting of the 180m tall are.
Challenges encountered along the way
included the disruption caused by the
pandemic. With international travel
restricted at a critical time, and vendors
and contractors stranded around the
world, the vital integration tests had to
be conducted remotely – thanks to a
combination of secure high-speed data
links, a range of remote collaboration
tools, and a spirit of collective
determination.
As ever, in-country value was a key
consideration. Among the components
produced locally were nine huge LPG
storage vessels, some of the largest ever
manufactured in the Sultanate. Through
the project, we also provided local and
international scholarship programmes to
45 Omani students.
Duqm Renery is an engineering and construction masterpiece
on a massive scale. Once complete, it will be the biggest renery
in Oman, delivering products to customers around the world,
diversifying the local economy, and fuelling economic growth for
the Sultanate.”
IAN DEBATTISTA
Vice President Operations and Project Director
ENGINEERING & CONSTRUCTION
Segmental overview continued
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New orders
Industry awards were lower than expected in
2022, and, as a result, E&C’s reduced new
order intake for the year was US$0.5 billion,
comprising an EPC award in Algeria and other
net variation orders. However, following a
sustained period of under-investment in the
sector, the market outlook remains positive for
2023 awards, driven by a renewed focus on
energy security, affordability and sustainability.
In 2022, following the reshaping of the
organisation and the implementation of best-in-
class compliance processes, the response from
clients has been very encouraging, evidenced
by the reinstatement of Petrofac to the ADNOC
bidding list. We are now free to compete in all
upcoming tenders in Abu Dhabi where there is a
strong pipeline of opportunities.
Tinrhert EPC2 Development Project,
Algeria
In September 2022, E&C, in partnership with
Genie Civil et Batiment (GCB), secured a
US$300 million EPC contract with Sonatrach
for the Tinrhert EPC2 Development Project of
which Petrofac’s share is around US$200 million.
This award follows the successful delivery of the
2018 contract awarded by Sonatrach for the
Tinrhert EPC1 project.
The project will boost natural gas production and
remove CO
2
from the eld’s gas reserves, within
specications for the global market, enabling
further economic growth in Algeria.
This award evidences a recognition of Petrofac’s
execution capability, our unique mix of skills, and
our track record of utilising partnerships, local
delivery and the creation of in-country value to
deliver exceptional outcomes for our clients and
their communities.
TenneT 2GW Programme,
Netherlands
In January 2023, the partnership of Petrofac
and Hitachi Energy signed early works
agreements with TenneT in support of their 2GW
Programme. Under the terms of the agreements,
preparatory work and detailed engineering will
begin, to ensure timely delivery of the rst two
Dutch offshore converter stations for TenneT’s
high voltage direct current (HVDC) offshore
wind grid expansion. This award represented
the rst step in both TenneT’s ambitious 40GW
programme and Petrofac and Hitachi Energy’s
partnership to support the offshore wind sector.
At the end of March 2023, the partnership of
Petrofac and Hitachi was awarded a multi-
year framework agreement by TenneT worth
approximately €13 billion. The framework
agreement, which represents the largest in
Petrofac’s history, covers six projects. Each
project comprises the EPCI of an offshore HVDC
transmission station, onshore converter station
and associated infrastructure.
ENGINEERING & CONSTRUCTION – KEY PROJECT PROGRESS
Key project status, % completion, December 2022
1
HPCL Visakh, India
Majnoon CPF, Iraq
Ain Tsila, Algeria
Thai Oil Clean Fuels, Thailand
MGCP, Oman
PC Orlen, Lithuania
Erawin, Libya
Tinrhert 2, Algeria
91%
87%
86%
78%
59%
26%
22%
2%
NOC/NOC-led consortium
IOC company/consortium
1. Excludes projects that are >95% complete.
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Collaboration with TenneT
and Hitachi Energy
• Early works agreements from TenneT
• Largest framework agreement in Petrofac’s history
• Grid integration and associated infrastructure
• Support for TenneT’s 2GW programme
• A key step in Europe’s energy transition
While considerable growth is
projected across the new energies
sector, the most immediate and
material opportunity is in offshore
wind.
As well as being one of the cleanest
and greenest forms of energy
available, offshore wind is also one
of the most cost-effective. Yet, as
the offshore wind sector scales
up, technical, resourcing and
supply chain challenges need to be
addressed.
As in our traditional oil and gas projects,
we always seek to take an innovative,
problem-solving approach to such
challenges, and one of the ways we can
do this is by forming innovative, value-
creating partnerships.
In June 2022, we entered a collaboration
with Hitachi Energy, to provide joint grid
integration and associated infrastructure
to support clients in the rapidly growing
offshore wind market.
The collaboration builds on the
complementary core technologies and
expertise of both our companies in
offshore wind.
The initial aim was to help a key client,
TenneT, to accelerate the preparatory
works in its current 2GW Programme,
and pave the way for an eventual
40GW of offshore wind capacity. The
partnership ultimately led to a signicant
early work agreement between TenneT,
Hitachi Energy and Petrofac, which
was further enhanced by the award
of Petrofac’s largest ever framework
agreement − a multi-year deal worth
approximately €13 billion.
We hope that the collaboration will
help other clients to accelerate their
respective wind farm developments.
It’s a great collaboration. We look forward to bringing our
industry-leading experience and deep domain knowledge
together, to benet our customers and power millions
more homes using renewable energy.”
JOHN PEARSON
Chief Operating Ofcer, New Energy Services
TRANSITION
Segmental overview continued
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Operational performance
Asset Solutions delivered another robust
performance in 2022, with a strong book-to-bill
of 1.2x for the year with each of the service lines
continuing to deliver growth. We maintained our
core 40% market share in the UK and a renewal
rate of 80% for operations and maintenance
contracts. Internationally, we have expanded
our operations into new – and within existing
– geographies with awards across each of the
service lines, including further expansion in the
new energy services sector.
In mature basins, clients have increased
their focus on late-life and end-of-life asset
management strategies, seeking to extend the
productive life and maximise the value from
their assets. As a result, we saw strong growth
in our Wells and Decommissioning business,
with signicant contract awards in Australia
and the Gulf of Mexico. Our ability to provide
a one-stop shop has led to multiple integrated
decommissioning projects which showcase
our Duty Holder services. Pioneered in the
UK North Sea, this unique integrated service
offering includes our engineering and project
management capabilities and the plugging and
abandoning of the wells, throughout which we
can take full responsibility from a regulatory
perspective, as the operator of the infrastructure.
In new energies, we entered into a number
of strategic alliances with leading technology
providers, as momentum in our four focus areas
of offshore wind, CCUS, hydrogen and waste-
to-value continues to increase. We executed
39 Pre-FEED and FEED studies in 2022, up
from 18 in 2021, and we are well-positioned
over the medium term to secure EPC and other
execution phase work as projects reach nal
investment decision.
Financial performance
Revenue for the year was up 4% compared
with the previous year at US$1.2 billion (2021:
US$1.1 billion), beneting from strong order
intake in the year. Full year EBIT was US$60
million (2021: US$74 million). EBIT margin for the
year was 5.2% reecting the contract portfolio
mix with the roll-off of certain historic high-
margin contracts.
New orders
Asset Solutions had another strong year of order
intake, securing US$1.4 billion of awards and
extensions in the year (2021: US$1.0 billion),
representing a book-to-bill of 1.2x.
Key awards included:
• United Arab Emirates – with the restoration
of the relationship with ADNOC, we have
subsequently won awards for a brownfield
EPC project to optimise operations and
reduce emissions and a field maintenance
services contract extension
• Australia – in the first of its kind in
Australia, Petrofac was awarded a major
decommissioning contract by the Australian
Government heralding the start of an era of
decommissioning in the nation’s offshore oil
and gas sector
• Gulf of Mexico – we entered into an alliance
with Promethean Decommissioning
Company, a decommissioning operator for
the decommissioning of fields in the offshore
Gulf of Mexico. The project uses Petrofac’s
proprietary project management tool to deliver
the decommissioning project with
comprehensive dashboards, transparency,
and assurance.
Backlog at 31 December 2022 by country
UK 39%
US 12%
Australia 11%
Bahrain 8%
India 6%
Mauritania 6%
Oman 6%
Malaysia 4%
Azerbaijan 3%
Other 5%
US$1.8bn
Backlog at 31 December 2022 by market
Wells & Decommissioning 41%
Asset Operations 37%
Asset Development 22%
US$1.8bn
Asset
Solutions
The Asset Solutions division provides
services across the full life cycle of
energy infrastructure. It manages
and maintains client assets, both
onshore and offshore, delivers small
to medium scale EPC projects and
provides concept, feasibility and
front-end engineering design (FEED)
services. The division is also home to
market-leading well engineering and
decommissioning capabilities. The
majority of Asset Solutions services
are executed on a reimbursable basis,
but we are responsive to clients’
preferred commercial models to deliver
our expertise. Asset Solutions has
three service lines: Asset Operations,
Asset Development, and Wells and
Decommissioning.
NICK SHORTEN
Asset Solutions Chief Operating Ofcer
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• Africa – Petrofac continued to grow its
presence in Africa with awards to provide
offshore operating services and well
decommissioning services in Mauritania,
Ghana and Senegal
• India – As part of our geographical
expansion, Petrofac was chosen to provide
integrated Operations and Maintenance
(O&M) services by Cairn Oil & Gas and
Vedanta Limited, India’s largest private oil and
gas exploration company, in support of its
upstream oil and gas facilities. Following this,
we were also awarded a new O&M contract
with Cairn, to provide integrated O&M and
auxiliary services.
• UK North Sea
We secured a number of extensions
throughout the year:
– With Serica Energy where we secured an
extension for maintenance execution,
maintenance consultancy and metering
services having supported the team for
more than four years to extend the field life
of assets in the UKCS.
– As Duty Holder, we secured a contract
extension with EnQuest having supported
the Kittiwake platform for more than two
decades.
– In our Wells and Decommissioning service
line, we secured a contract with i3 to
provide well engineering, well operations
and well operator services for its UK North
Sea licence areas.
New energies within Asset Solutions
In new energies, the strong momentum we
have gained over the last two years continued
with further developments in 2022. The market
remains active, and we have secured a series
of early-stage awards and strategic alliances
with technology providers. This leaves us well
positioned over the medium term to secure EPC
and other execution phase project work, as
projects reach nal investment decision.
• Carbon capture: we secured our first carbon
capture project within a UK cluster, with the
Pre-FEED award for a UK refinery, in addition
to work with Stockholm Exergi and Storegga
• Hydrogen: with our first new energies project
in Egypt, we are assisting Mediterranean
Energy Partners assess the feasibility of a new
green hydrogen to ammonia facility which
could open up other opportunities for the
subsequent EPC projects in the country. A first
new energies project in Chile, for Transitional
Energy Group, sees us advise on and oversee
the initial phases of a green ammonia project
• Waste-to-value: we supported GreenFuels
with the development of their Sewage Sludge to
Aviation Fuel project, which was funded by the
UK Department for Transport
• Emissions reduction: we secured a flare
gas capture project for ADNOC, supporting
Ceraphi Energy to evaluate closed-loop
geothermal technology to decarbonise
offshore oil and gas assets using existing
wells, in collaboration with EnQuest and Net
Zero Technology Centre
• Offshore wind: engineering studies for
several offshore wind developments
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Segmental overview continued
C_GEN_Page C_GEN_PageL2
C_GEN Section
Operational performance
Net production for the year increased by 97% to
1,261 thousand barrels of oil equivalent (kboe) in
2022 (2021: 640 kboe) mainly due to a full year
of East Cendor production and the completion
of projects and well workovers.
A water injection well was completed in the
Irama eld in May 2022 to provide pressure
support to the eld. Following positive pressure
response, production from Irama peaked in
October 2022 at 2.6 kboe/d from a 2021
average of 1.0 kboe/d.
The shutdown in the main Cendor eld in
December 2021 was resolved initially by
installing a temporary partial gas lift system prior
to the full reinstatement of the risers in Q3 2022.
The gas lift assisted wells in Cendor and East
Cendor are now able to produce at their full
technical potential.
As a result of the reinstatement of the gas lift
risers, the Irama water injection and a full year of
production from the East Cendor eld, the 2022
net production exit rate was 3.5 kboe/d (2021:
1.8 kboe/d).
In 2022, our Flare Reduction Taskforce in
partnership with the Block PM304 Asset’s
Reservoir Management and Operations Teams
successfully reduced emissions intensity by
49%. This was achieved through an ongoing
gas shut-off programme, switching diesel for
fuel gas that would otherwise be ared, and
operational optimisations focused on logistics
and enhancements.
The average realised oil price for Block PM304
increased by 49% to US$112/boe in 2022
(2021: US$75/boe).
Financial performance
Revenue for the year increased 174% to
US$137 million (2021: US$50 million), reecting
the increased production and higher oil price
realised.
EBITDA increased 419% to US$109 million
(2021: US$21 million), principally reecting the
higher revenue from PM304.
IES generated EBIT of US$58 million (2021: loss
of US$6 million). IES generated positive free
cash ow due to Block PM304 performance as
well as receiving US$98 million of divestment
proceeds related to the Greater Stella Area and
the Mexico operations.
Impairment of Block PM304
The production sharing contract for Block
PM304 in Malaysia expires in September
2026, and we are in continued technical and
commercial discussions with Petronas and the
joint venture partners in respect of an extension.
Based on developments in the current year
and the associated uncertainty in respect of
securing that extension, management continues
to assume that it will not be secured when
assessing the carrying value of the asset at the
year-end. The review of all relevant assumptions
resulted in an impairment reversal of US$6
million (2021 restated: charge of US$33
million) recorded in the year. As a result of this
impairment, the net book value carrying amount
of Block PM304 as of 31 December 2022 is
US$86 million (2021 restated: US$84 million).
2022 3.5
2021 1.8
2020 2.6
Net PM304 production (kboe/d)
Integrated
Energy Services
Integrated Energy Services (IES)
is Petrofac’s upstream oil and gas
business. Our interest in the Production
Sharing Contract (PSC) for Block
PM304, Malaysia’s offshore Cendor
eld, is the sole asset in the portfolio.
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Risk management
Our risk management framework provides us
with a consistent approach to identify, manage
and oversee the risks that may impact our
business and is designed to underpin the
Group’s longer-term sustainability. Based on the
principles and guidelines of BS ISO 31000:2018
Risk Management, our framework encompasses
the policies, standards, procedures, culture,
behaviours, organisational design, systems and
other aspects of the Group that, taken together,
enable Petrofac to operate effectively and
efficiently.
Governing our risk management
framework
Petrofac’s system of risk governance comprises
several committees and management processes
that bring together reports on the management
of risk at various levels.
The Board has overall responsibility for risk
management, which includes establishing
the Group’s risk appetite and its enterprise
risk arrangements, and ensuring we have an
effective risk management framework in place.
The Audit Committee has been delegated the
responsibility of monitoring and reviewing the
integrity and effectiveness of the Group’s overall
risk management and internal control systems.
The Audit Committee primarily, but not solely,
uses the processes and reports outlined below
for evaluating the Group’s risk management and
internal control activities:
• Principal Risk Report identifies and
assesses the principal risks and emerging
risks facing the Group, outlines how these are
managed, reviews the effectiveness of
We operate in challenging environments
and understand that risks are an inherent
part of our business. Identifying and
managing risks and opportunities is key
to the successful delivery of our strategy.
relevant controls and monitors exposures
with respect to our risk appetite. Coupled
with updates from the Group Chief Executive,
Chief Financial Officer and the Group Risk
Team, this report is submitted quarterly and
is considered at both Committee and Board
level throughout the year. A summary of this
Report is provided on pages 78 to 87.
• Management Reports for various principal
risks are submitted, either to the Board or to
one of its Committees whose area of
expertise best aligns with the risk area under
consideration. The goal is to enhance the
level of oversight for each principal risk.
The relevant Committee is responsible for
reviewing the status of each principal risks,
seeking information on controls and
processes, and considering mitigation and
management strategies. Following its review,
each Committee provides feedback to the
Audit Committee and to the Board for
discussion and recommendations.
• Control Self-Assessment certificates are a
way for management to review and maintain
adequate internal controls. These certificates
are completed by each function and business
unit to check and assure the adequacy of
controls and disclose any reportable
weaknesses in the control environment. They
are then cascaded and consolidated to
confirm the extent to which the internal
controls have operated effectively throughout
the year. Further reviews are performed by
the Internal Audit team, and the Audit
Committee receives regular updates from the
Head of Internal Audit on the effectiveness of
the internal controls.
Risk governance framework |
Board
• Sets risk appetite
• Approves principal risks
• Reviews and approves significant
opportunities
Audit Committee
• Reviews principal risks, emerging risks
and risk appetite
• Provides assurance on risk management
and internal controls framework
Group Risk Committee
• Oversight of the Enterprise Risk
Management Framework, including
the principal and emerging risks and
risk appetite
• Reviews and recommends significant
opportunities
Divisional Risk Review Committees
• Divisional management oversight and
review of opportunities
Service lines
• Risk management is embedded within
each service line
Group functions
• Assurance to management, the Audit
Committee and the Board
Divisional
Risk Review
Committees
Group Risk
Committee
Service
lines
Group
functions
Board
Audit
Committee
Internal
audit
Our knowledge and insight, coupled
with the right set of tools and processes,
help us understand the factors that lead
to risk, and enable us to manage them
effectively.
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76
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In addition to these activities, reports are submitted to the Audit
Committee by our internal and external auditors, as well as from
our newly established Assurance function. In reviewing each of
the submitted reports, the Committee considers:
• How effectively risks have been identified
• How they have been mitigated and managed
• Whether appropriate and prompt action is being taken to
remedy any failings or weaknesses
• Whether the cause of the failing or weakness was the
consequence of poor decision making, a need for more
extensive monitoring, or a reassessment of process
effectiveness
These considerations are intended to provide the Audit Committee
with a balanced assessment of the Group’s principal risks and the
effectiveness of the systems of internal controls.
The Group Risk Committee is responsible for the oversight of the
risk management framework, as agreed by the Board, including
the review of Group policies and the management of the Group’s
Delegated Authorities.
In addition to the Group’s regular risk review meetings, the
Group Executive Committee meets regularly to discuss safety,
compliance, operational, commercial and finance matters, with
changes in risks and opportunities being identified and addressed
as appropriate.
The diagram on page 76 sets out the risk governance framework,
showing the interaction between the various risk review and
management committees.
Identifying and managing our risks
The Group’s divisions and functions conduct regular risk
assessments and the risk information from these is consolidated
into our principal risks. Emerging risks are identified as part of the
business planning cycle, with a view to considering those risks
that may have a material impact beyond the planning horizon.
The list of principal and emerging risks is reviewed by the
Group Risk Committee, endorsed by the Audit Committee
and approved by the Board. Once approved, each principal
risk is categorised and assigned to an executive owner, who is
accountable for coordinating the risk assessment, reviewing the
adequacy of relevant internal controls, establishing a response
plan, and reporting.
Depending on the category of the risk, the Assurance
teams may be engaged to devise and support an effective
assurance programme. The Board may also appoint a relevant
Committee to enhance the level of oversight.
We assess the materiality of each principal risk and aim to
contain them within the context of our risk appetite framework.
Our risk appetite statements are established in three layers:
• The first layer aligns with Petrofac’s vision, purpose,
business model, and strategy
• The second layer ties into the business plan through overall
risk indicators
• The third layer operationalises the previous layers through
specific statements and indicators relevant to each of our
principal risks
The Board and the Group Risk Committee jointly govern all
material new business opportunities and projects (including
bid submissions, new country entries, joint ventures,
investments, acquisitions and disposals) and provide direction
as to the management and mitigation of any related risk
exposures. Proposals are only presented to the Group Risk
Committee after being reviewed and supported at divisional
level. Based on the recommendations of the Group Risk
Committee, the Board then has responsibility for approving or
declining any high-risk opportunities.
Enhancing our risk management framework
During 2022, we conducted internal and external reviews of
the effectiveness of our enterprise risk management (ERM)
programme. Key areas for improvement identified during these
reviews included:
• Further integration and better alignment between project-
and portfolio-level risk assessment procedures within the
ERM programme
• Enhancing the second line of defence controls when
evaluating the effectiveness of risk management inputs
We will continue to address and enhance these areas during
2023.
Risk management process
Integration with key
business processes
• Delegated authorities
• Strategic planning/budgeting
• Treasury/financial planning
• Stage-gate reviews
• Project controls and
management
• Procurement and vendor
management
• Business continuity and
crisis management
Alignment with
assurance functions
via principal risks
• Compliance
• Value assurance
• Financial control
• HSE
• Cyber security
Communicate and consult
Assurance
Company values and culture
Enterprise Risk Management system (and other tools)
Leadership, communications and engagement
1.
Risk
identification
2.
Risk
assessment
3.
Risk
treatment
4.
Risk
monitoring
5.
Risk
reporting
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The Group’s principal risks were reviewed and
revised at the end of 2022, drawing on feedback
from the business, Executive team, and the
Audit Committee.
During the year no new emerging risks were
identified and the impact of the Covid-19
pandemic was contained, with no material
influence on our principal risks.
As of the start of 2023, the Group’s current
principal and emerging risks are outlined below:
Risk Category Principal/Emerging Risk
Strategic Risks
Adverse geopolitical and macro-economic changes in key geographies
Low order intake
Failure to deliver strategic initiatives
Failure to deliver new energies strategy
Operational Risks
Operational and project performance
Insufcient IT resilience
HSE incidents
Financial Risks
Loss of nancial capacity
Misstatement of nancial information
Legal & Compliance Risks
Breach of laws, regulations, and ethical standards
People Risks
Inadequate leadership and talent management
Principal risks and uncertainties
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Risk appetite
– We actively assess risks associated with geopolitical changes in our key geographies, and we
have appetite for more risk in this area where we have the experience of managing it.
– Where we operate in countries that have high or very high geopolitical risks, we actively monitor
risks associated with geopolitical events and have plans in place to support the ongoing delivery,
or suspension, of our business in each country.
Risk appetite measures
– Cash flow exposed to geopolitical risk
Sub-risks
Sub-risks are specic to each country where we operate based on scenarios triggered by various
threats such as:
– Political conflicts between countries
– Civil unrest
– Recession and fiscal stress
– Increased controls over trade and payments
FOR MORE INFORMATION SEE / Pages 8-13; 16-19; 24-25; 60-63
Assessment: No change
The risk remained unchanged during 2022. While there was an increase in our risk prole, this was
driven by the conict between Russia and Ukraine. Although our exposure in these countries is very
low, new sanctions enforced created new compliance requirements for the Group. This increase was,
however, offset by reduced economic and geopolitical risks in our major markets due to the increase
in commodity prices and the reduced impact of Covid-19.
Risk category | Strategic
Link to our strategy | Return to growth
Mitigation and management
The Group Risk Committee and the Board actively monitor geopolitical developments and seek to
avoid or minimise our exposure to jurisdictions with risk levels beyond our appetite. A detailed risk
analysis is conducted before entering any new country and while pursuing and executing projects
in new geographies.
We have good experience in project execution and maintain positive relationships with key
stakeholders. Careful consideration is given to contractual terms and security conditions through
our detailed risk review process, and we seek external advice on specialist issues as required.
The delivery model is modied to suit each project and we limit exposure to single sources of
supply and service. We limit our xed asset commitment within each contract and closely monitor
and manage our cash ow and commitments.
Our Business Continuity Management System considers response to and recovery from
geopolitical incidents. There is also continued focus on evacuation and emergency response.
Our operations are assessed and executed in accordance with our Security Policy and Security
Standards.
In 2022, we performed detailed assessments and continuously evaluated the impact of
the evolving situation relating to Ukraine. This involved keeping our people and operations
safe, ensuring we remained compliant with new sanctions, and making sure our contractual
commitments in Russia were met.
The impact of adverse geopolitical changes in our key geographies includes risks to the successful
delivery of our strategy, our operations and associated impact on margins, the safety of our people,
security issues, material logistics, and travel restrictions. The Group’s backlog is concentrated in
emerging markets, which may increase our vulnerability to adverse geopolitical events.
Adverse geopolitical and macro-economic changes in key geographies
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Risk appetite
• We pursue opportunities consistent with our strategic focus and core competencies,
and expect to secure a diversified portfolio in order to de-risk adverse events in our
core markets
• We have appetite for more risk provided we review each opportunity, taking account of its
respective risk profile and putting in place relevant controls to adequately mitigate risks to the
planned execution strategy. We do not enter, or will exit, an opportunity, if we cannot ensure
compliance with laws and regulations, execution quality or the safety and security of our people
or reputation.
Risk appetite measures
– Book-to-bill ratio
Sub-risks
– Oil and gas industry downturn
– Loss of key markets due to geopolitical/litigation/budgetary concerns
– Increased competition in our core geographies/sectors
– Reduced bidding competitiveness
– Global events and subsequent impact on investments
FOR MORE INFORMATION SEE / Pages 8-13; 16-19; 24-25
Assessment: No change
The increase in the principal risk due to the Russia-Ukraine conict and lower than expected order
intake, especially in E&C, was offset by a positive outlook, mainly driven by stable oil and gas prices,
and good visibility of the pipeline for 2023. We were able to return to bidding in key markets from
which we had been temporarily excluded during the SFO investigation.
Risk category | Strategic
Link to our strategy | Return to growth
Mitigation and management
Our order intake is driven by our strategy, the development of which is overseen by the Board.
Our service lines work together to identify, review, and win opportunities. We regularly analyse our
business development activities, bid-to-win ratios, and our competition.
In 2022, we focused on addressing evolving client needs in areas such as increased in-country
value and improved sustainability performance. We further enhanced our competencies in new
energies and improved our bidding competitiveness by becoming a leaner organisation.
We continued to secure new orders during 2022, including projects in Algeria, Australia, and the
United States, albeit the overall level of new orders secured in E&C was lower than expected.
We see a diverse pipeline of bidding opportunities in the coming years across markets and
geographies.
Low order intake
The risk is that our clients exercise capital discipline, which impacts the demand for our services
through the cancellation or delay of planned investments. The potential impact is that the Group
could fail to deliver its anticipated backlog and growth targets.
The Group wins most of its work through a competitive bidding process, and as competition increases,
there is a risk that we could fail to maintain differentiated margins.
Principal risks and uncertainties continued
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Risk appetite
• We have limited appetite for risks affecting our strategic initiatives, although we recognise that the
delivery of these is also a function of market dynamics. We identify and adequately mitigate the
risks to each initiative, having some appetite to be flexible over the timing of their delivery
Risk appetite measures
– Initiative impact (cost and value) and schedule targets
– Initiative-specific success goals
Sub-risks
– Rebalance: failure to maintain cost competitiveness
– Reshape: failure to deliver 1tec: functional excellence
– Rebuild: failure to rebuild backlog
– Rebuild: failure to deliver client-centricity strategy
FOR MORE INFORMATION SEE / Pages 6-7; 8-19; 21
Assessment: No change
We made progress across all our strategic initiatives, and the risk remained stable during 2022.
Risk category | Strategic
Link to our strategy | Best-in-class delivery and Return to growth
Mitigation and management
Each strategic initiative is governed by a stage-gate process and overseen by the Group Executive
Committee. The Board regularly assesses our strategic initiatives and overall strategic plan to
satisfy itself that the right balance of risk, capability, and reward is maintained. We conduct detailed
sensitivity analysis to assess the robustness of our plans.
The Group Risk Committee reviews all material new business opportunities and projects,
new country entries, joint ventures, investments, acquisitions, and disposals.
In a challenging environment, we continued to deliver our strategic initiatives in 2022.
Key achievements for the year included:
• Embedded our new technical services organisation (1tec)
• Continued execution of our formal in-country value programme to help us drive growth and
support delivery in our core and new geographies
• Continued establishing new partnerships
• Continued push into new markets including progress with a one-stop shop solution for
integrated decommissioning
Failure to deliver strategic initiatives
Each of our strategic priorities is supported by various strategic initiatives that are overseen by senior
management and the Board. To build enterprise value, we ensure each initiative is de-risked and
respective success targets are met, assuring all stakeholders that we are pursuing an appropriate
strategy capable of delivering shareholder value. The impact is reected in the appetite from new
investors and, consequently, the market valuation of the Group.
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Risk appetite
• We are willing to be exposed to more risk in the new energies sector, and recognise that lower
margins are to be expected as we seek growth.
Risk appetite measures
– Short and medium-term growth forecasts
Sub-risks
– Inability to secure partnerships
– Adverse/delayed change in government policies
– Changes in client requirements (terms and conditions and funding)
– Failures in our supply chain
– Failures in delivery and execution of new energies projects
FOR MORE INFORMATION SEE / Pages 6-7; 10-11; 16-19; 72
Assessment: Increased
The risk increased in 2022 due to delays in awards. These were largely driven by reduced funding and
government support for energy transition initiatives in our targeted markets.
Risk category | Strategic – Emerging Risk
Link to our strategy | Best-in-class delivery and Return to growth
Mitigation and management
New energies focuses on four clearly dened segments of the market, namely offshore wind,
CCUS, hydrogen, and waste-to-value, where we have a strong track record and relevant
experience. The growth will be facilitated by: partnering in relevant technologies and with
established developers; monitoring relevant government policies; and supporting the new energies
organisation with 1tec expertise to successfully execute and deliver new energies projects.
In 2022, we:
• Established a significant new partnership with Hitachi Energy in offshore wind
• Continued to embed our technical services organisation (1tec) fully into our new energies
offerings and organisation
• Continued improvements in our ESG performance, as demonstrated by positive ESG ratings
(e.g. AA rating from MSCI)
Failure to deliver new energies strategy
Due to climate change and the energy transition, our markets are changing, and the portfolios of our
clients are going through a major transformation. Our new energies services line was established to
respond to this change, and the Group has outlined a medium-term ambition for 20% of revenue to
come from this over the medium-term. An inability to meet changing market needs will limit our future
growth, and would hinder our commitments with regards to our response to climate change.
Principal risks and uncertainties continued
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Risk appetite
• We have limited appetite for risks affecting execution of our portfolio. Portfolio margins will be
maintained to support the delivery of our target total shareholder return relative to our global
peers over the cycle.
Risk appetite measures
– Division-level cash flow and net income
Sub-risks
– Project execution
– Operation of assets
FOR MORE INFORMATION SEE / Pages 6-7; 8-15; 22; 68-75
Assessment: No change
Despite various project and operational challenges faced during the year, the nancial impact of the
project risks that had previously been identied were recognised during the year. The risk prole of our
operational assets was reduced, the impacts of the pandemic were reected and therefore the overall
risk level remained the same as last year but with a reduced portfolio of projects.
Risk category | Operational
Link to our strategy | Best-in-class delivery, and Superior returns
Mitigation and management
Key risks to project delivery are initially identied at the tender stage, through the risk review
process by relevant risk review committees and escalated to the Group Risk Committee or the
Board, as required. On award, detailed execution strategies are further developed. During the
execution phase, emerging risks and opportunities are managed through assurance, operational
and project reviews. Lessons learnt are cascaded through leadership lines and our quality
initiatives are focused on a right-rst-time approach.
In 2022, we continued to embed 1tec, ensuring the value assurance framework was integrated
to govern all aspects of project delivery across our operations. Project recovery plans were
maintained, and project delivery remained a signicant area of focus for the Executive team and
the Board throughout the year.
Operational and project performance
Our portfolio typically includes a relatively small number of high-value contracts, a larger number of
lower-value contracts, and some sizeable oil and gas assets. Cost or schedule overruns on any of the
high-value contracts, or operational issues affecting production within our key assets could negatively
impact the Group’s protability, cash ow and relationships with key stakeholders.
Risk appetite
We will manage our IT infrastructure to ensure the security of condential information and the
availability of our critical systems is not compromised
We have some appetite for risks to our IT infrastructure and cyber-security that do not impact services
provided to our clients or deteriorate the effectiveness of key controls
Risk appetite measures
– Number of significant cyber incidents
– System resilience and access
– Removal of legacy systems
Sub-risks
– System breach due to malware attack
– Unavailability/loss of data due to inadequate response/recovery
– Cyber attacks
– Network unavailability due to end-of-life devices
– Compromise of user accounts through phishing and social engineering attacks
– System unavailability due to legacy and unsupported applications and server infrastructure
– Operational technology breach leading to operational disruption
FOR MORE INFORMATION SEE / Pages 53
Assessment: No change
The risk remained stable during 2022.
Risk category | Operational
Link to our strategy | Best-in-class delivery
Mitigation and management
We operate a Group-wide information security/cyber-security programme and have a cloud
strategy to maintain a resilient IT platform.
In 2022, we continued to improve our information security controls through:
• A review of our information security practices with regards to global standards and best
practices
• The migration of our enterprise storage solution to meet the needs of our organisation
In 2023 we will proceed with the opportunities identied during the review of our information
security practices.
Insufficient IT resilience
The Group’s performance is increasingly dependent on the ongoing capability and reliability of our
IT platforms. We (as with all companies) continue to be exposed to external cyber-security threats.
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Risk appetite
• We have no appetite for activities that do not meet our Horizon Zero vision
Risk appetite measures
– Number of projects/assets at risk
– Total recordable incident rate
Sub-risks
– Oil spills/gas leaks
– Integrity failure
– Loss of well control
– Driving accidents
– Fall from heights/lifting accidents/accidents during commissioning
– Contractor/JV partner/client with inadequate HSE standards/controls
– Threats to security of our staff
– Threats to employee health and wellbeing
FOR MORE INFORMATION SEE / Pages 28-31; 50-54
Assessment: No change
Despite some recent high-potential incidents, the risk remained stable in 2022 and was mitigated by
the implementation of our new HSE strategy.
Risk category | Operational
Link to our strategy | Best-in-class delivery
Mitigation and management
Safety is fundamentally important and intrinsic to Petrofac’s behavioural DNA. It is governed largely
by our operating framework, Group policies, and systems that cover all elements of occupational
health and safety, security, environmental, and asset integrity programmes.
In 2022 we improved on an already strong HSE performance with a new HSE strategy. Key
achievements for the year include:
• Enhanced leadership visibility and oversight on site performance through site visits and safety
scorecards
• New campaign and use of driving improvement applications to enhance our Driver Safety
Programme
• Collaboration with contractors through annual performance reviews and rollout of Safety
Hotspots at worksites to improve their respective safety performance
• Improved communication and engagement with worksites through the use of digital
technology
Details of our HSE strategy, 2022 initiatives and 2023 priorities are outlined on pages 50 and 53.
HSE incidents |
There are several factors that could impact our ability to operate safely. These include safety and asset
integrity risks and they extend to a range of environmental risks. The risk is the potential
harm to our people, and the commercial and/or reputational damage that could be caused.
Principal risks and uncertainties continued
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Risk appetite
We have no appetite for a loss of nancial capacity that results in a failure to meet our nancial
obligations as they fall due and remain solvent, or that impairs our ability to meet client requirements
for guarantees.
Risk appetite measures
– Liquidity
– Credit rating
– Unfunded facilities
Sub-risks
– Failure to maintain adequate liquidity
– Failure to provide guarantees
FOR MORE INFORMATION SEE / Pages 88-93
Assessment: No change
Despite the challenges we experienced during the year in respect of nancial performance resulting
in the renegotiation of our debt facilities nancial covenants, we have maintained our credit rating,
secured an extension for our bank debt facilities, and observed a marginal improvement on the
availability of guarantees.
Risk category | Financial
Link to our strategy | Superior returns
Mitigation and management
We maintain an adequate level of liquidity in the form of readily available cash, short-term
investments, or committed credit facilities, and ensure a minimum level of liquidity (as dened by
the Audit Committee) is maintained.
Debt, cash, and liquidity balances are monitored on a daily basis. We prepare cash ow forecasts
on a quarterly basis, aligned to our reforecast cycle, and rolling cash forecasts on a monthly basis
to help manage liquidity and short-term forecasting. Our nancial policy targets BBB investment
grade credit metrics over the long term.
We maintained our credit rating, retained an appropriate capital structure, secured an extension
for our bank debt facilities, and reduced cash held in joint ventures and in highly regulated
jurisdictions. However, the Group’s liquidity position in the mitigated severe but plausible downside
scenario considered in the Group’s going concern assessment is reliant on a small number of
collections from clients, which are not entirely within the direct control of the Group. Accordingly,
there is a material uncertainty applicable to the going concern assessment as explained in note 2.5
to the Group consolidated nancial statements.
In 2023, we will continue to focus on cash collection and will maintain nancial discipline.
Loss of financial capacity |
Failure to maintain adequate liquidity or provide guarantees to our customers could adversely affect our
ability to deliver our strategy and may ultimately result in nancial loss and/or ability to comply with our
nancial covenants.
Costs of debt may rise as a result of rating agency downgrades or reduced access to funding.
Access to funding is critical to our sustainability and future growth. Reduced access to funding could
hamper the Group’s growth and/or adversely affect the Group’s nancial performance.
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Risk appetite
• We have no appetite for reporting materially incorrect financial information
Risk appetite measures
– Assessment of effectiveness of financial controls
– Reporting errors/restatements
Sub-risks
– Inaccurate revenue recognition/cost forecasting
– Breakdown in transactional accounting controls
– Asset carrying amounts exceeding recoverable amounts
– Inaccurate corporate income tax reporting
– Breakdown in system access controls
– Inaccurate financial consolidation and reporting
FOR MORE INFORMATION SEE / Pages 94; 116-121; 125
Assessment: No change
In 2022, control deciencies were identied with respect to the timely identication of increases in
contract costs for the Thai Oil Clean Fuels contract and prior year adjustments were identied. With
respect to the Thai Oil Clean Fuels contract, management performed additional assurance activities to
satisfy itself that there were no other similar occurrences within the broader E&C portfolio. Following
the implementation of these additional assurance procedures in response (see Audit Committee report
on page 114), the overall risk remained stable.
Risk category | Financial
Link to our strategy | Best-in-class delivery
Mitigation and management
Our Financial Control Framework ensures that adequate controls are identied, implemented, and
monitored throughout all our key nancial activities. Adequacy of these controls are certied and
reviewed by various assurance activities and overseen by the Audit Committee.
In 2022, we continued to improve our controls in this area with the ongoing implementation of a
new Enterprise Resource Planning platform, which will continue in 2023. Furthermore, in response
to the identied deciencies in internal control and prior year adjustment in respect of the Thai Oil
Clean Fuels contract, we implemented additional assurance activities. These included specic
verications that any updated bills of quantities information had been reected in the contract cost
forecasts, and if necessary, the nancial statements.
Also, we included additional disclosures and corrections in the Group’s consolidated 2022 nancial
statements following both a review of the 2021 nancial statements by the Financial Reporting
Council’s Corporate Reporting Review Team and the identication of other prior year adjustments
(note 2.9 of the consolidated nancial statements).
Misstatement of financial information |
We execute complex projects in a dynamic environment across various jurisdictions with numerous
clients. Our business performance and nancial results reect our current assessment of assumptions
and nancial estimates, however actual outcome may vary. These may negatively impact investor
condence.
Principal risks and uncertainties continued
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Risk appetite
• We have no appetite for non-compliance with laws and regulations
• We expect our direct and indirect staff and third parties to act according to the highest ethical
standards and in line with our Code of Conduct
Risk appetite measures
– Third-party due diligence
– Employee completion of mandatory compliance training and annual declaration of compliance
– Investigations of Speak Up cases
Sub-risks
– Violation of laws and regulations, including: Foreign Corrupt Practices Act, UK Bribery Act,
whistleblower protection, trade compliance, Modern Slavery Act, anti-money laundering, and
antitrust and competition
FOR MORE INFORMATION SEE / Pages 23; 28-31; 63-67; 123-124
Assessment: No change
• The overall risk level remained unchanged in 2022, this was due to the changes and
improvements implemented following the SFO investigation, which concluded in 2021.
Risk category | Legal and compliance
Link to our strategy | Best-in-class delivery
Mitigation and management
We operate a Group-level Compliance Programme overseen by the Compliance and Ethics
Committee. We continued to enhance this programme during 2022, including:
• Reviewed and revised our controls using new online tools relating to gifts and entertainment
and conflict of interest processes
• Revised our due-diligence controls, including new documentation and enhanced oversight of
the Third-Party Review Committee
Priorities for 2023 will be determined upon the completion of independent external reviews. Further
information on our compliance programme is provided on pages 65 to 67.
Breach of laws, regulations and ethical standards |
Non-compliance with laws, regulations and ethical standards due to failures in our compliance controls
or unethical behaviour, including but not limited to bribery, corruption, money laundering, trade
sanctions, and labour rights, may result in nes and/or adverse impact on our reputation.
Risk appetite
• We take a balanced approach towards risks to establishing and maintaining a talented workforce
within the context of prevailing job market economics
• Our leaders live our values and behaviours and operate as one team at all times.
Risk appetite measures
– Results of employee surveys
– Staff turnover
– Diversity and inclusion targets
– Succession plans
Sub-risks
– Inability to attract and retain the capability necessary to deliver the business plan
– Fragility in our succession planning for key roles
– Leadership fails to live our values and behaviours
– Reduced performance of staff due to insufficient levels of diversity and inclusion
FOR MORE INFORMATION SEE / Pages 21; 28-31; 55-58; 63-64; 112-113
Assessment: Increased
The risk increased since our last update due to a higher attrition rate in a tight job market.
However, this continues to have limited impact on our operations.
Risk category | People
Link to our strategy | Best-in-class delivery
Mitigation and management
We remain condent that our policies to attract, retain, train, promote, and reward our people are
appropriate for the Group, and will enable us to meet our strategic goals.
In 2022, we established a new resourcing plan and initiated a recruitment drive to meet our future
human capital requirements. These efforts were coupled with improvements in our overall benet
structure and reward and remuneration initiatives. Diversity and inclusion initiatives were also
implemented successfully, including the launch of two additional Employee Networking Groups
(see pages 56 and 58 for more detail).
Inadequate leadership and talent management |
Our operations are heavily dependent on our ability to attract, retain and lead the right level of skilled
and experienced personnel. Failure to do so could negatively impact our distinctive, delivery-focused
culture, and prevent us from maintaining our operational capability and positive relationships with
clients.
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Financial review
The Group’s nancial performance in 2022 reected
continuing challenges in the Engineering & Construction
(E&C) portfolio, partly offset by strong performance
in Asset Solutions and Integrated Energy Services
(IES). The lingering impact of the Covid-19 pandemic
continued to affect our E&C operating segment, with
additional costs incurred due to extended schedules not
being fully recovered from our clients. Overall, revenue
was down year-on-year due to lower activity. Despite
underperformance in protability and low levels of new
awards in the year, cash ows have been effectively
controlled to manage the impact on net debt.
In April 2023, after the year-end, we extended the
Revolving Credit Facility (RCF) and both bilateral term
loans by 12-months to October 2024 (see note 26 of the
consolidated nancial statements for further details).
Cash ows have been
effectively controlled, despite
underperformance in protability
and low levels of awards in the
year, to manage the impact on net
debt”
.
AFONSO REIS E SOUSA
Chief Financial Ofcer
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United Kingdom
26%
Iraq
5%
Algeria
15%
Americas
4%
Thailand
10%
Kuwait
3%
Oman
10%
Other
21%
Lithuania
6%
Year ended 31 December 2022 Year ended 31 December 2021 (restated)
3
Business
performance
2
US$m
Separately
disclosed items
US$m
Reported
US$m
Business
performance
2
US$m
Separately
disclosed items
US$m
Reported
US$m
Revenue 2,591 – 2,591 3,038 – 3,038
EBITDA (126) (12) (138) 56 (142) (86)
EBIT (205) (7) (212) (12) (177) (189)
Net (loss)/profit
1
(284) (26) (310) 3 (248) (245)
Income statement
Revenue
Group revenue decreased 15% to US$2.6 billion (2021 restated
3
: US$3.0 billion). This was principally due to a decline in revenue in the
E&C operating segment which decreased 33% reecting lower levels of activity compared with the prior year. Revenue in Asset Solutions
increased by 4% primarily driven by growth in Wells & Decommissioning and Asset Developments, partially offset by lower levels of
activity in Asset Operations. Revenue in the IES operating segment increased signicantly driven by an increase in production and higher
realised oil prices.
The Group generated revenue from a broad range of geographic markets in 2022, with UK, Algeria, Thailand and Oman generating 61%
of Group revenue (2021: top four markets – UK, Algeria, Thailand and Oman generated 65% of revenue).
Earnings Before Interest and Tax (EBIT)
The Group reported a business performance
2
EBIT loss of US$205 million (2021 restated
3
: US$12 million), largely driven by a US$299
million EBIT loss in E&C (2021 restated
3
: US$62 million), reecting the impact of further unrecovered costs in the legacy portfolio, cost
increases on the Thai Oil Clean Fuels contract and some adverse commercial settlements. Asset Solutions EBIT margins were below
prior year at 5.2% (2021: 6.7%), due to the contract portfolio mix in addition to the roll-off of certain historic high-margin contracts, and a
higher contribution from pass-through revenue in Wells & Decommissioning. EBIT in IES increased to US$58 million (2021: loss of US$6
million) due to the increase in revenue without a commensurate increase in costs. Group business performance
2
EBIT margin declined to
(8.0)% (2021 restated
3
: (0.4)%), reecting the reductions in E&C and Asset Solutions described above, partially offset by improvement in
IES. The reported EBIT was a loss of US$212 million (2021 restated
3
: US$189 million) due to the business performance described above
and lower separately disclosed items incurred in 2022.
External revenue by geographical segment
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Year ended 31 December 2022
Engineering &
Construction
US$m
Asset
Solutions
US$m
Integrated
Energy
Services
US$m
Corporate &
others
US$m
Consolidation
adjustments &
eliminations
US$m
Business
performance
2
US$m
Separately
disclosed
items
US$m
Reported
US$m
Total revenue 1,311 1,158 137 6 (21) 2,591 - 2,591
EBIT (299) 60 58 (24) – (205) (7) (212)
EBIT margin (22.8)% 5.2% 42.3% n/a n/a (7.9)% n/a (8.2)%
Year ended 31 December 2021 (restated)
3
Engineering &
Construction
US$m
Asset
Solutions
US$m
Integrated
Energy Services
US$m
Corporate &
others
US$m
Consolidation
adjustments &
eliminations
US$m
Business
performance
2
US$m
Separately
disclosed Items
US$m
Reported
US$m
Total revenue 1,952 1,111 50 – (75) 3,038 - 3,038
EBIT (62) 74 (6) (18) – (12) (177) (189)
EBIT margin (3.2)% 6.7% (12.0)% n/a n/a (0.4)% n/a (6.2)%
2022
US$m
2021
(restated)
3
US$m
Finance expense
Group borrowings (85) (36)
Lease liabilities (12) (16)
Unwinding of discount on
provisions (1) (1)
Total (business performance
2
) (98) (53)
Separately disclosed items (18) (28)
Total (reported) (116) (81)
Taxation
The Group had a reported income tax expense was US$16
million (2021 restated
3
: credit of US$13 million).
Business performance
2
income tax expense for the year of
US$15 million (2021 restated
3
: credit of US$56 million), reecting
a change in mix of prots in the jurisdictions in which the prots
and losses were generated. Tax provision releases in the year
were US$20 million (2021 restated
3
: US$73 million) due to
favourable tax audit outcomes in certain jurisdictions in relation to
prior period assessments.
Net profit/(loss)
Business performance
2
net loss attributable to Petrofac Limited
shareholders for the year was US$284 million (2021 restated
3
:
prot of US$3 million) primarily due to the lower EBIT and the
higher net nance expense incurred in the year, in addition to
higher income tax charge. Business performance
2
net margin
was (11.0)% (2021 restated
3
: 0.1%).
A reported net loss of US$310 million (2021 restated
3
: US$245
million) resulted from the movements noted above and the lower
net separately disclosed items incurred in 2022.
Separately disclosed items
During the year, the Group incurred US$26 million (2021
restated
3
: US$248 million) of net separately disclosed items.
Depreciation and amortisation
Business performance depreciation and amortisation increased
to US$79 million (2021: US$68 million), due to increased
production in IES.
2022
US$m
2021
(restated)
3
US$m
Engineering & Construction 12 24
Asset Solutions 10 10
Integrated Energy Services 51 27
Corporate 6 7
Total (business performance
2
) 79 68
Separately disclosed items (5) 35
Total (reported) 74 103
Finance income/(expense)
Finance income decreased to US$7 million (2021 restated
3
:
US$15 million) due to a reduction in the unwinding of the discount
on the receivables, and lease interest from joint operation partners.
Business performance nance expense increased to US$98 million
(2021 restated
3
: US$53 million), largely reecting the full year effect
of the higher interest rate associated with the high yield bond
secured as part of the renancing completed in November 2021.
See note 6 of the consolidated nancial statements for details of
the SDI nance expense item.
2022
US$m
2021
(restated)
3
US$m
Finance income
Bank interest 1 1
Lease interest from JO partners 6 9
Unwinding of discount on
receivables - 5
Total 7 15
Financial review continued
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90
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These predominantly related to:
• US$(5) million net non-cash reversal of impairment charge
primarily resulting from a review of the carrying amount of the
investment in Block PM304 in Malaysia
• US$(10) million of net fair value remeasurements, primarily
resulting from the improved final settlement of the contingent
consideration receivable from the 2020 disposal of the
Group’s operations in Mexico
• US$18 million of financing related costs associated with
the embedded derivative in respect of the Revolving Credit
Facility
• US$10 million of cloud ERP software implementation costs
• Other net separately disclosed items of US$13 million
including: restructuring and redundancy costs (US$4 million);
a loss on the sale of the deferred consideration receivable
due from Ithaca Energy UK Ltd (US$3 million); and
professional service fees in the Corporate reporting segment
(US$5 million)
Further details of these separately disclosed items can be seen in
note 6 of the consolidated nancial statements.
Cash flow
Operating cash flow
Operating activities generated a net cash outow of US$146
million (2021: US$161 million), principally reecting the working
capital inow during the year, partially offset by a decline in
EBITDA and the payment of the penalty imposed by the UK
courts in relation to the SFO investigation which concluded in
2021. The operating prot cash ow adjustments were US$(12)
million (2021 restated
3
: US$(59) million). Net income taxes paid
increased to US$52 million (2021: US$42 million) as a number of
tax assessments and audits concluded, resulting in the payment
of the remaining balance which had been previously provided.
2022
US$m
2021
(restated)
3
US$m
Business performance EBITDA (126) 56
Operating profit adjustments (12) (59)
Operating profit before
changes in working
capital and other items (114) (3)
Net working capital movement 135 (88)
Separately disclosed items paid (115) (28)
Net income taxes paid (52) (42)
Net cash flows used
in operating activities (146) (161)
Working capital inflow/(outflow):
2022
US$m
2021
(restated)
3
US$m
Inventories 7 (15)
Trade and other receivables (101) 211
Contract assets 268 78
Restricted cash 26 (93)
Net derivative contracts 6 (13)
Trade and other payables (95) 120
Contract liabilities 62 (40)
Accrued contract expenses (38) (336)
Net working capital movements 135 (88)
The net working capital inow of US$135 million (2021
restated
3
: outow of US$88 million) was due to cash inows
on contract assets and contract liabilities more than offsetting
cash outows in trade and other receivables, trade and other
payables and accrued contract expenses. These cash inows
were largely driven by the progress achieved in the E&C
operating segment as the portfolio continued to mature, while
the underlying DSO (days sales outstanding) increased due to
longer billing cycles as a result of Covid-19 related delays on
E&C projects as well as slower cash collections from clients.
Accrued contract expenses outow decreased due to lower
volumes, higher payment milestones being reached in the year
relating to vendors and subcontractors predominantly in the
E&C business unit and the maturity of the E&C project portfolio.
Consequently, trade and other payables increased as accrued
contract expenses migrated into trade payables.
Free cash flow
The free cash outow for the year of US$188 million (2021:
US$281 million) primarily reects high net cash outow used in
operating activities, and the higher interest payments, partially
offset by higher divestment proceeds received in respect of the
sale of the Mexican assets in 2020 and the disposal proceeds
in relation to the consideration received from Ithaca Energy UK
Limited receivable.
Group capital expenditure decreased to US$46 million (2021:
US$53 million), with approximately 57% being incurred in IES for
the nal stages of the capital development programme in Block
PM304.
2022
US$m
2021
(restated)
3
US$m
Net cash flows generated from
operating activities (146) (161)
Capital expenditure (46) (53)
Divestments 98 9
Receipts from joint operation
partners in respect of leases 28 59
Other investing activities, including
dividends received from associates
and JVs 18 23
Net cash flows generated from
investing activities 98 38
Interest paid (86) (36)
Separately disclosed items –
refinancing-related costs paid - (23)
Repayment of lease liabilities (54) (99)
Free cash flow (188) (281)
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Balance sheet
IES carrying amount
The carrying amount of the IES portfolio stood at US$86 million
at 31 December 2022 (2021 restated
3
: US$84 million), solely
comprising the Group’s interests in its operations in Malaysia and
reecting the partial impairment reversal described above.
Leases
Net lease liabilities, calculated as gross lease liabilities minus
64.7% of leases relating to Block PM304 in Malaysia, reecting
the amount receivable from joint operation partners, decreased
6% to US$116 million at 31 December 2022 (2021: US$124
million). Net lease liabilities attributable to PM304 amounted to
US$52 million (2021: US$59 million) and largely relate to the
bareboat charters for the oating equipment used for block
operations.
Total equity
Total equity at 31 December 2022 decreased to US$112 million
(2021 restated
3
: US$423 million), reecting the operational losses
in the year. No dividends were paid in the period (2021: nil).
Of the US$112 million of total equity at 31 December 2022,
US$129 million (2021 restated
3
: US$413 million) was attributable
to Petrofac Limited shareholders and US$(17) million (2021: US$10
million) was attributable to non-controlling interests.
Net debt and liquidity
Net debt
Net debt, excluding net nance leases, increased to US$349
million at 31 December 2022 (2021: US$144 million). The net
debt increase was predominantly due to the payment of the SFO
penalty and interest payments in 2022.
Total gross borrowings less associated debt acquisition costs
were US$799 million at 31 December 2022 (2021: US$764
million). This consisted of US$583 million senior secured notes,
US$117 million drawn on the revolving credit facility and US$99
million of term loans (net of US$7 million and US$1 million
respectively of debt acquisition costs).
2022
US$m
2021
US$m
Cash and short-term deposits 450 620
Interest-bearing loans and
borrowings (799) (764)
Net debt (349) (144)
Extension of debt facilities
Following the capital raise (note 22) and the renancing
completed in 2021, the Group successfully completed an
amendment and extension to its existing bank facilities in April
2023 (note 26).
The Group therefore now has facilities consisting of US$600m
9.75% senior secured notes (due 2026) a US$162m revolving
credit facility and two bilateral loan facilities totalling US$90m (all
of which mature in October 2024). All facilities are for general
corporate purposes.
It should be noted that as this amendment and extension
(including a waiver of the nancial covenant testing date of
31 December 2022) was completed after the year end and the
Group did not have an unconditional right to defer repayment
of these facilities for greater than 12 months as at the balance
sheet date, the borrowings have been disclosed as current in the
balance sheet.
Liquidity
The Group’s total available borrowing facilities, excluding bank
overdrafts, were US$880 million at 31 December 2022 (2021:
US$880 million).
Of these facilities, US$56 million was undrawn at 31 December
2022 (2021: US$85 million). Combined with the Group’s cash
and short-term deposits of US$450 million (2021: US$620
million), the Group had US$506 million of liquidity available at
31 December 2022 (2021: US$705 million).
Following the extension of the debt facilities in April 2023, the
total available facilities were:
Borrowing facilities
Amount
(US$m) Maturity date
4
Senior secured notes 600 Nov-26
Revolving credit facility 162 Oct-24
Term loan 1 45 Oct-24
Term loan 2 45 Oct-24
Total borrowing facilities 852
The revolving credit facility and term loans have been amended
and extended as described above, and are subject to nancial
covenants relating to liquidity and EBITDA. More detail can be
found in note 26 to the consolidated nancial statements.
Note that 31 December 2022 covenants were waived by the
banks (leverage and interest cover).
The Group has a BB- (positive outlook) credit rating from S&P
and a B+ (negative outlook) credit rating from Fitch.
Financial review continued
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Going concern
The Directors considered the going concern assessment for
the extended period up to 31 December 2024 (the Assessment
Period). The Group closely monitors and manages its funding
position, liquidity and nancial covenant headroom by producing
robust cash forecasts and assessing downside sensitivities
considered to be severe but plausible based on the Group’s
principal risks and uncertainties.
These forecasts show that the Group will be able to maintain
compliance with its nancial covenants and have sufcient
liquidity headroom during the Assessment Period under its
base case scenario. However, the Group’s liquidity position in
the mitigated severe but plausible downside scenario is reliant
on a small number of collections from clients which are not
entirely within the direct control of the Group. Accordingly,
there are material uncertainties applicable to the going concern
assessments, as dened in auditing and accounting standards,
related to the timing of receipt of these collections from clients.
The Directors concluded, after rigorously evaluating relevant,
available information, that, they remain condent in the prospects
of the Group to maintain compliance with its nancial covenants
and sufcient liquidity even in a severe but plausible downside
scenario.
Backlog
The Group’s backlog decreased 15% to US$3.4 billion at
31 December 2022 (2021 restated
3
: US$4.0 billion), reecting
low new order intake in E&C due to industry delays to awards,
partially offset by strong order intake in Asset Solutions.
Overall, Group order intake for the year was US$1.9 billion,
representing a book-to-bill of 0.7x. Order intake in E&C was
US$0.5 billion (2021: US$1.2 billion), comprising an EPC
contract in Algeria and other net variation orders. Order intake
in Asset Solutions increased to US$1.4 billion (2021: US$1.0
billion), representing a book-to-bill of 1.2x.
Dividends
The Board recognises the importance of dividends to
shareholders and expects to reinstate them in due course, once
the Company’s performance has improved.
Prior year adjustments
A number of prior year adjustments have been identied in the
year and reected in the comparative information in this year’s
nancial statements.
The largest of these adjustments was in respect of the Thai Oil
Clean Fuels contract, where indications of a material growth
in the bills of quantities volumes resulting from a periodic
engineering scope review had not been appropriately identied
and considered prior to the approval of the Group’s consolidated
nancial statements for the year ended 31 December 2021.
These should have been evaluated and reected in the 2021
nancial statements. This issue was identied by the Group’s
Internal Audit function and indicated a deciency in internal
controls in respect of this uniquely complex project, executed in
a consortium. In order to satisfy itself that there were no other
similar occurrences within the broader E&C portfolio, the Group
undertook a series of incremental assurance activities (see note
2.9 on page, the principal risks and uncertainties disclosures on
page 78 to 87 and the Audit Committee report on page 114 to
122). These assurance activities conrmed that there were no
such occurrences.
In September 2022, the Group’s 31 December 2021 nancial
statements were subject to a review by the Financial Reporting
Council’s (FRC) Corporate Reporting Review Team (CRRT). This
review is now closed. As stated in note 2.9 to the consolidated
nancial statements, the review resulted in some classication
and presentational prior year adjustments being recorded in the
Group’s consolidated income statement and statement of cash
ows and the Company’s statement of cash ows, but did not
have any impact on consolidated net prot or consolidated net
change in cash and cash equivalents.
Full details can be found in note 2.9 to the consolidated nancial
statements, alongside details of other prior year adjustments.
AFONSO REIS E SOUSA
Chief Financial Ofcer
27 April 2023
Notes:
1. Attributable to Petrofac Limited shareholders
2. This measurement is shown by Petrofac as a means of measuring underlying business performance, see
note 4 of the consolidated financial statements
3. The prior year numbers are restated as detailed in note 2.9 to the consolidated financial statements
4. Borrowing facilities at 27 April 2023
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Viability statement
In accordance with the requirements of the 2018 UK Corporate Governance Code (the UK Code),
the Directors conrm that they have performed a robust assessment of the Group’s prospects
and its ability to continue in operation and meet its liabilities as they fall due over the period of their
assessment. In doing so, they have considered the Group’s current position and the principal risks
and uncertainties that would threaten the viability of the business.
The Group’s nancial statements for 2022 are prepared on a going concern basis with a material
uncertainty identied with respect to the Group’s ability to maintain liquidity covenant compliance and
adequate liquidity, linked to the timing of receipt of a small number of relatively high value collections,
as described in the going concern assessment in note 2.5 of the consolidated nancial statements.
Details of the Group’s risk governance and management framework and a description of its principal
risks and uncertainties are included in the Strategic report on pages 78 to 87. In addition to the
inherent risk of delivering large and complex projects safely, on time and on budget, the key medium-
to-long term factors affecting the Group’s prospects together with the Group’s current position and
outlook are set out below:
Factors affecting the Group’s prospects Group’s current position and outlook
Energy market outlook: the long term
outlook for energy prices affects the
investment decisions of our clients and
consequently the timing and quantum
of new awards, principally in our E&C
division.
Oil Price: in the short term, oil price
affects cash generated from oil and gas
production in our IES division.
Economic and market environment:
the appetite of clients to award contracts
and any restrictions or opportunities on
access to certain markets reects the
macro-economic environment, geo-
political conditions and other macro
events.
Addressable market: the Group’s addressable
market, which excludes Saudi Arabia and Russia, is
estimated to grow to more than US$127 billion per
annum by 2025, driven by growing energy demand
and a lack of investment in the industry in the past
decade.
Signicant growth is expected in the Group’s core
MENA region, driven by spending from national
oil companies, where Petrofac has a differentiated
position with its local delivery model.
In addition, signicant short- to medium-term
opportunities are expected in the offshore wind,
decommissioning and sub-Saharan Africa markets,
where the Group also has differentiated offerings.
Factors affecting the Group’s prospects Group’s current position and outlook
Near term visibility: at 31 December 2022, the
Group had backlog of US$3.4 billion, with secured
revenue in 2023 of approximately US$2.1 billion
(55%). In addition, new order intake for the year to
date in 2023 is approximately US$1.7 billion with
a further US$1.5 billion at preferred bidder stage
and a second TenneT contract expected, worth in
excess of US$1 billion. The current tendering pipeline
is approximately US$51 billion of opportunities
scheduled for award in the period to June 2024.
Medium term ambition: in the medium term, the
Group is targeting revenue of US$4 billion – US$5
billion, sector leading EBIT margins and a net cash
position, which is supported by its business plan.
Energy transition: the nature and
speed of the transition to new energies,
and the Group’s ability to address these
new market opportunities in the medium
to long-term.
Energy transition: the Group is well positioned in the
new energy services market, with track record of over
a decade in offshore wind and is rapidly expanding
credentials in carbon capture, utilisation and storage
(CCUS), hydrogen production and waste-to-value.
The short-term to medium-term opportunity is
expected to materialise principally through further
EPC opportunities in the offshore wind market,
decommissioning work related to the transition away
from fossil fuels, and FEED and pre-FEED studies in
the other new energy markets.
In addition to the multi-year project framework
agreement with TenneT, the Group is strongly
positioned to further capitalise on the offshore wind
EPC market, through its collaboration with Hitachi
Energy, a market-leading equipment manufacturer,
to provide joint grid integration and associated
infrastructure.
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Factors affecting the Group’s prospects Group’s current position and outlook
Cost competitiveness: the ability to
maintain a sustainable, cost competitive
position to win contracts and positive
economic returns through operational
excellence.
Cost management: the Group focuses on
continuous innovation, the application of technology
and other measures to deliver cost savings and
maintain its cost competitiveness. In 2021, the
new operating model (1tec) was initiated and
further embedded during 2022. 1tec provides the
consistency and predictability of delivery required
to enable the Group to maintain high standards of
execution and deliver sector leading returns.
Availability of funding: the capital
markets’ and banking appetite to nance
the global energy industry and the Group.
Net debt and liquidity: at 31 December 2022, the
Group had cash and cash equivalents of US$450
million, net debt of US$349 million, liquidity of US$0.5
billion and was in compliance with its nancial
covenants (taking into account the waiver secured in
early 2023 for the covenants as at Q4 2022). US$600
million (68%) of the Group’s borrowing facilities
mature in November 2026, with the remaining 32%
maturing in steps over the period to October 2024.
The Group has stated its ambition, supported by its
business plan, to transition to a net cash position,
reducing its reliance on external borrowings.
The Group’s prospects are subject to inherent forecasting risks relating to the Group’s principal risks
and uncertainties, which include inter alia low order intake, loss of nancial capacity, macro-economic
uncertainty, prevailing oil price environment, impact of energy transition, ability to re-enter core
markets, and the ability of the Group to deliver its strategic initiatives.
The Directors have determined that a three-year period to 31 December 2025 (the Period) is the most
appropriate duration for its viability assessment period. This Period has been selected as it provides
the Board sufcient visibility into the Group’s clients’ capital and operational expenditure plans, it
covers the period over which existing backlog is executed, and it is consistent with the Group’s
business plan duration. These elements comprise the foundation for modelling the Group’s nancial
performance, including sensitivities and scenarios, which instructs the Directors on whether there is a
reasonable expectation of viability over the Period.
The key assumptions within the Group’s business plan for the Period include:
• Oil price: US$85 per barrel in 2023, reducing to US$80 per barrel in 2024 and US$75 per barrel
in 2025
• Accessible market: continued access to a diversified pipeline of opportunities throughout the
Period, excluding Saudi Arabia and Russia
• New order intake: a book-to-bill of 1x or greater in each year of the plan in both E&C and Asset
Solutions business units
• Margins: EBIT margins in E&C remain at lower levels in the near-term as a result of low order
intake in recent periods, an underperforming mature contract portfolio, limited contribution from
new awards and a reduced operating leverage. A recovery in the medium-term is expected,
driven by the return of awards in the Group’s core markets in addition to the TenneT offshore wind
framework agreement. Asset Solutions is expected to continue its resilient performance with
revenue growth at healthy margins
• Cash collections: receipt of a small number of high value collections, as described in the going
concern assessment in note 2.5 to the consolidated financial statements
• Liquidity and net debt: the Group has a long-term capital structure through its senior secured
notes (due in 2026), and RCF and bilateral loans which were recently extended until October
2024. The Group has a significant net working capital balance which is expected to unwind
during the Period, reducing net debt and improving liquidity
The impact of cost increases on the legacy mature E&C portfolio of contracts is reected in the
Group’s nancial performance to 31 December 2022 and in the business plan margin forecasts. With
seven contracts completed or substantially completed
1
in 2022 and a further ve of the remaining
eight active contracts scheduled for completion in 2023, the Directors have concluded that the risk of
cost increases during the period is lower than in previous periods.
In order to assess the resilience of the Group to threats to its viability, the Group’s business plan
forecasts were subjected to robust multi-variable stress test and sensitivity analyses together with
an assessment of potential mitigating actions. This analysis included scenarios that considered the
crystallisation of principal risks and uncertainties arising from the following:
1. Completed and substantially completed contracts: contracts where (i) a Provisional Acceptance Certificate (PAC) has been issued by the client, or (ii) transfer of care
and custody (TCC) to the client has taken place, or (iii) PAC or TCC are imminent and no substantive work remains to be performed by Petrofac
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PETROFAC LIMITED | Annual report and accounts 2022
96
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Viability statement continued
Principal risks and uncertainties Scenarios
• Adverse geo-political and macro-
economic changes in key geographies
• Low order intake
A material decline in new order intake, notably a
c.50% reduction in value of new awards in E&C and
c.20% in Asset Solutions, spread across the Period,
which could be driven by factors such as, but not
limited to a low energy price environment, economic
uncertainty, accelerated energy transition and other
restrictions such as sanctions.
• Failure to deliver strategic initiatives
• Poor project execution
EBIT margin deterioration of c.1% for E&C, which
could be driven by cost overruns and adverse
commercial or legal settlements. Delays in material
cash collections.
• Loss of financial capacity The Group retains access to nancing at current
levels and secure guarantees in support of new
contract awards.
• Breaches of laws, regulations, and
ethical standards
No nancial impact that threatens viability would
crystalise from contingent liabilities during the Period
(refer to note 30)
The scenarios above were modelled in combination to assess the impact on the Group’s liquidity
headroom and nancial covenant metrics. While the Group is expected to retain sufcient liquidity and
covenant compliance under this downside scenario, there is a material uncertainty with respect to the
Group’s ability to maintain liquidity covenant compliance and positive liquidity, linked to the timing of
receipt of a small number of relatively high value collections, as described in note 2.5.
The Directors have also evaluated mitigating actions that management could realistically take to avoid
or reduce the impact or occurrence of the principal risks and uncertainties materialising. Management
has a track record of implementing cost saving measures, such as during 2020 and 2021 in response
to the impact of the COVID-19 pandemic and fall in oil prices, and taking actions to maintain sufcient
liquidity in the absence of budgeted new awards and working capital unwind. Consequently, the
Directors are condent that management could continue to build on such measures in response
to the crystallisation of principal risks and uncertainties and have modelled such cost savings
accordingly.
The Directors also considered the following key assumptions (the assumptions) in its viability
assessment:
• Oil price: with the current sustained higher energy price environment, the Group will benefit from
improvements in the new order outlook and commercial and operating environment in both the
E&C and Asset Solutions divisions
• Winning work: the Group expects to continue to win work based on its resources,
competencies, experience and track record as a leading contractor to the energy industry and
the impact of restricted geographies in the pipeline will not have a material impact on future
prospects
• Access to finance: the Group will continue to have access to finance at maturity of the existing
facilities during the Period, alternatively will repay those facilities as it transitions to a net cash
position
• Other adverse events and conditions: the Group is exposed to inherent risks, for example,
poor operational execution, unfavourable commercial settlements and/or adverse outcomes in
disclosed contingent liabilities (refer to note 30), which could – based on the nature, amount and
timing of such events and conditions – threaten its viability. Notwithstanding the material
uncertainty referenced above, based on available liquidity headroom, the occurrence of such
events and conditions are assessed not to fully erode liquidity or covenant headroom, after
available mitigations
• Mitigations available: the specific mitigations modelled include reducing operating costs and
continued suspension of the dividend. Additional actions are in the control of – or realistically
available to – management, such as further disposals of non-core assets
The Group actively monitors and responds to the risks identied in the viability assessment scenarios.
There is a risk that future conditions will be more adverse than assumed, particularly with respect to
the timing of collections that has given rise to a statement of material uncertainty within the going
concern assessment. However, the Directors concluded, after conducting a robust assessment
taking into account the Group’s current position, prospects, principal risks and uncertainties and
the assumptions listed above, that it has a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due over the three-year assessment period to
31 December 2025.
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C_GEN Section
Chair’s introduction
Chair’s introduction
On behalf of the Board, I am pleased to
present the Group’s Corporate governance
report for 2022.
Like other businesses in this sector,
Petrofac has faced numerous
macroeconomic headwinds, including
labour shortages, cost ination and supply
chain delays during the year.
Despite this challenging backdrop, the
business has remained resilient and
has made good operational progress in
resolving challenges on pandemic-affected
legacy projects. The Group has worked to
capitalise on progress made in 2021 and
signs of recovery are beginning to be seen.
RENÉ MÉDORI
Chair
Board changes
May 2022 saw the departure of Andrea Abt and George Pierson
as members of our Board. I would like to take this opportunity to
thank them both for their contributions to the Company during
their six-year tenure on the Board.
At the end of March 2023, Sami Iskander, our Group Chief
Executive, stepped down from the Board. During his tenure with
Petrofac, Sami oversaw the resolution of the SFO’s investigation,
and led a comprehensive renancing programme. He has
reshaped the business and put it rmly on a path to growth.
On 1 April 2023 Tareq Kawash joined as our new Group Chief
Executive. With 30 years’ international EPC leadership experience,
and an impressive business development track record, the Board
believes he will be well placed to build on the foundations laid by
Sami, and we look forward to welcoming him to the Board.
Governance
The Board understands the benets of annual performance
evaluations, both for Directors on an individual basis, as well as for
the Board as a whole. So, in accordance with the UK Corporate
Governance Code, an externally facilitated effectiveness evaluation
was undertaken during the year. This provided an objective view of
our performance and proposed areas for focus as we continue to
modernise our approach.
Diversity and inclusion
Diversity and inclusion continue to be focal points for the Board
as these are considered to be signicant factors in the Company’s
future success. We believe that an inclusive and diverse workforce
promotes safety, productivity and wellbeing, and underpins our
ability to attract and retain employees.
Looking ahead
Over the year ahead, we will continue to focus on getting Petrofac
back to delivering major projects at scale, and to building and
developing relationships with our key clients. As Tareq joins the
Board, we will endeavour to build on the foundations set by Sami
to win new opportunities.
As a Board, we will continue to ensure that we make the right
decisions to support the long-term sustainable success of our
business to create long-term value for shareholders.
I would like to thank all our stakeholders for their continued
support over recent years.
RENÉ MÉDORI
Chair
27 April 2023
Good governance is central to our
business and as a Board, a key priority
is to continue to do what is best for our
Company, our employees, our clients
and our shareholders.”
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97
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The UK Corporate Governance Code
As a Jersey incorporated company listed in the UK, Petrofac
is subject to the principles and provisions of the UK Corporate
Governance Code (UK Code). The UK Code underpins the
corporate governance framework for premium listed companies
and sets out principles and provisions of good governance with
compliance with the UK Code resting with the Board. A copy of
the UK Code is available at www.frc.org.uk. Petrofac is required
to explain how the Company has complied with the UK Code and
applied the principles and provisions set out therein.
This Governance report details how the Company has applied
the principles and complied with the provisions of the UK Code.
For the year ended 31 December 2022, the Board has been
compliant in all but one aspect of the UK Code.
Provision 19 of the UK Code states that the chair of a company
should not remain in post beyond nine years from the date of
rst appointment, although it does allow for an extension of the
chair’s tenure for a limited time to support effective succession
planning and development of a diverse board. While he has
served less than nine years as Chair, René Médori’s tenure as a
Board member reached nine years in 2021 and, as a result, he is
no longer considered to meet the denition of independent in the
UK Code. The 2021 Annual Report noted that Mr Médori’s tenure
would be extended to provide continuity on the Board following
the challenges recently faced by the Group as well as changes
to the Board. The Nominations Committee has recommended
that, in light of the forthcoming change in Group Chief Executive,
Mr Médori remain in post through 2024. Further details are set out
on page 112.
During 2022, the Company complied with all relevant requirements
of the Disclosure and Transparency Rules, the UK Listing Rules
and narrative reporting requirements.
The following table sets out where shareholders can nd further
information on how the Company has applied the principles of the
UK Code within this Annual Report.
1. Board leadership and company purpose
The Board sets the tone of the Company with regard to the
corporate governance framework and the application of
corporate values and behaviours. The Board also maintains
oversight to ensure resources are in place for the Company
to meet its objectives and that there is an established risk
framework for the management of effective controls.
a. Effective Board
Pages 99-107
b. Purpose, values and culture Pages 2-3, 14, 105
c. Governance framework and controls Pages 103, 118
d. Stakeholder engagement Pages 20-23, 106
e. Workforce engagement Pages 21, 55-58
2. Division of responsibilities
There is a clear denition of Board responsibilities, with Directors
collectively responsible for the development of strategy and the
long-term success of the Company. We believe all Directors
work together in an atmosphere of openness, trust, and mutual
respect. To ensure there is a clear division of responsibilities,
while retaining control of key decisions, the Board has in place
a Schedule of Matters Reserved that sets out items for its
consideration and approval.
f. Board roles and responsibilities
Pages 99-105, 108
g. Independence Pages 99-100
h. External appointments and
Board attendance
Pages 104-106
i. Key activities of the Board,
information and support Pages 102-104
3. Composition, succession and evaluation
The Company has a formal, rigorous, and transparent selection
procedure for the appointment of Directors. The Nominations
Committee has the responsibility of identifying and nominating all
candidates, with emphasis given to ensuring Board composition
remains balanced with the multi-disciplinary skills and experience
needed to support Petrofac’s future plans.
j. Appointments to the Board
Page 111
k. Board skills, experience and knowledge Page 108
l. Annual Board evaluation Pages 109-110
4. Audit, risk and internal control
The Board maintains a sound risk management and internal
controls framework to ensure the Group’s long-term strategic
objectives can be achieved. Transparent policies and procedures
have been established to ensure the independence and
effectiveness of the Group audit function, with well-established
committees in place to assist it in the undertaking of its
delegated duties.
m. Internal and external audit functions,
financial reporting and narrative
statements
Pages 116-118
n. Fair, balanced and understandable
assessment Page 120
o. Internal control framework and
risk management
Pages 76-87, 118
5. Remuneration
The Remuneration Committee ensures that there is a formal and
transparent process for determining and reporting on Executive
Director and senior management remuneration. Remuneration
policies have been designed to support the Group’s strategy, in
alignment with the Company’s purpose, values and behaviours
and to promote the long-term success of the organisation.
p. Alignment of remuneration with purpose,
strategy and values
Pages 126-127
q. Remuneration policy Pages 129-137
r. Performance outcomes and
strategic targets
Pages 139-141
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98
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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Board of Directors
as at 25 April 2023
René Médori
Chair
Committees
N
N
Appointed: January 2012
Chair: May 2018
Independent: On appointment
Key strengths and experience
Extensive international nancial
experience, with knowledge of balance
sheet strengthening opportunities and
nancing arrangements. Well-established
knowledge of governance and regulatory
matters and a good understanding of
operational and strategic management.
Stepped down as Finance Director of
Anglo American plc in April 2017 and
retired from the company in January
2018, after 12 years. Was a non-executive
director of De Beers, Anglo American
Platinum Limited and SSE plc until
December 2017 and of Cobham plc until
January 2020.
External appointments
Non-executive chair of Puma Energy and
Non-executive director of Vinci SA and
Newmont Corp.
Tareq Kawash
Group Chief Executive
Appointed: April 2023
Independent: Not applicable
Key strengths and experience
Over 30 years' experience in the
engineering and construction industry,
completing both domestic and
international assignments for mega
onshore and offshore oil and gas projects.
Has a wealth of operational and
commercial experience, with extensive
knowledge of the Middle East, having lived
and worked in the region for 18 years.
Was most recently Senior Vice President
of McDermott's onshore and offshore
business lines. Prior to McDermott's
combination with CB&I in 2018, he was
CB&I's Group Vice President, Engineering
and Construction, International. Before
joining CB&I in 2000, he worked with
KBR for two years and Consolidated
Contractors Company for seven years.
External appointments
None
Afonso Reis e Sousa
Chief Financial Ofcer
Appointed: September 2021
Independent: Not applicable
Key strengths and experience
Extensive experience in corporate and
project nance, specialising in energy-
related and infrastructure nancing. Joined
the Company in 2012 as Group Head
of Structured Finance and accumulated
a portfolio of increasing responsibilities
including Group Treasurer, Head of Tax,
and Group Head of Enterprise Risk. Has
more than 25 years’ experience in nance,
including a background in investment
banking, having begun his career with
Deutsche Morgan Grenfell.
External appointments
None
Matthias Bichsel
Senior Independent Director
Committees
A
C
N
R
R
Appointed: May 2015
Senior Independent Director: May 2018
Independent: Yes
Key strengths and experience
More than 40 years’ experience in the oil
and gas industry. Extensive commercial and
strategic capabilities. Deep understanding
of operational, project and technology
management. Broad knowledge of
sustainable development issues. Until
2014, held several senior managerial roles
over his 34-year career with Royal Dutch
Shell, latterly as a member of the Group’s
executive committee and director of Capital
Projects and Technology.
External appointments
Non-executive director of Sulzer AG
(Switzerland), Canadian Utilities Limited
(Canada), South Pole Group (Switzerland)
and Voliro (Switzerland). Member of
the advisory board of Chrysalix Energy
Venture Capital (Canada).
Sara Akbar
Non-executive Director
Committees
A
N
R
Appointed: January 2018
Independent: Yes
Key strengths and experience
More than 40 years’ experience in the oil
and gas industry with a unique insight into
the Middle Eastern region. Wide-ranging
international experience and signicant
operational and project management
capabilities. Sara was Chief Executive
Ofcer of Kuwait Energy KSC until 2017,
which she founded in 2005. Served
in various positions in the oil and gas
industry in Kuwait and internationally from
1981 to 1999. Holds a BSc in Chemical
Engineering. Former Member of the
Kuwait Supreme Council for Planning
and Development.
External appointments
Chair and CEO of Oil Serve and Chair
of the Advisory Board to the American
University of Kuwait, and an active
member of the Board of Trustees of
Kuwait’s Silk Territory project.
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99
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C_GEN Section
Our Board in numbers
Committee membership key
A
Audit Committee
N
Nominations Committee
R
Remuneration Committee
C
Compliance and Ethics Committee
C
Chair of Committee
Ayman Asfari
Non-executive Director
Committees
N
Appointed: January 2002
Non-executive Director: January 2021
Independent: No
Key strengths and experience
Prominent record with strong operational
leadership skills and international focus.
Extensive entrepreneurial and business
development skills, and an in-depth
knowledge of the oil and gas industry.
Established Petrofac International in 1991
and, following a corporate reorganisation
in 2002, became Group Chief Executive,
before leading the successful initial public
listing of the Company in 2005. Has more
than 40 years’ experience in the energy
industry. Formerly worked as MD of a major
civil and mechanical construction business
in Oman. Stepped down as Group Chief
Executive on 31 December 2020.
External appointments
Executive Chair of Venterra Group plc.
Chair of the Asfari Foundation. Member
of the board of trustees of the American
University of Beirut and of the Carnegie
Endowment for International Peace. Fellow
of the Royal Academy of Engineering and
member of the Chatham House Panel of
Senior Advisors.
David Davies
Non-executive Director
Committees
A
A
C
N
Appointed: May 2018
Independent: Yes
Key strengths and experience
Extensive international and nancial
experience, including capital and debt
raising as well as managing companies
exposed to substantial and rapid change.
Served on the boards of listed companies
in seven different countries. More than
36 years’ experience as a nancial
professional with a successful career
as Chief Financial Ofcer and Deputy
Chairman of the executive board at OMV
Aktiengesellschaft. Served as Group
Finance Director for both Morgan Crucible
Company plc and London International
Group plc and was a non-executive
director of Ophir Energy Plc until May
2019 and of Uniper SE until April 2020.
External appointments
Non-executive director of Wienerberger
AG.
Francesca Di Carlo
Non-executive Director
Committees
C
C
N
R
Appointed: May 2019
Independent: Yes
Key strengths and experience
Extensive background in various senior
positions, specialising in corporate
nance operations, strategy, audit,
human resources, and procurement.
She is currently Group Executive Vice
President of Procurement of the Enel
Group, having previously held the roles of
Director of the People and Organization
division, Director of Group Audit, and
Head of Corporate Strategy. At the
Telecom Italia Group she held various
roles including Head of Investor Relations,
Head of Financial Planning and Head of
Corporate Development and M&A. Former
Chairperson of Stream and Telespazio, as
well as a former director of Sky Italy.
External appointments
Group Executive Vice President of
Procurement at ENEL S.p.A.
Alison Broughton
Secretary to the Board
Key strengths and experience
Joined Petrofac in August 2011 and is
responsible for the Group’s regulatory,
governance and listing rule compliance
framework. A fellow of the Chartered
Governance Institute, with over 25 years’
experience in a UK-listed environment.
Prior to joining Petrofac, she spent eight
years with Wolseley plc (now Ferguson
plc) as Deputy Company Secretary. In
2002, she joined the company secretariat
function of Shell Exploration & Production
Limited, part of the Royal Dutch Shell
group, following the takeover of Enterprise
Oil plc, where she started her company
secretarial career in 1997.
25%
female representation
8
different nationalities
represented
50%
of Directors falling within the
Parker Review’s classication
+150 years
Board experience
Board of Directors continued
as at 25 April 2023
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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100
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Group Executive Committee
Jim Andrews
Group Head of Health, Safety,
Environment and Quality
Sophie Reid
Group Head of Communications
Matthew Barton
Group General Counsel
Nick Shorten
Chief Operating Ofcer,
Asset Solutions
Jonathan Kenneck
Chief Technical Ofcer
Des Thurlby
Group Director of Human Resources
Elie Lahoud
Chief Operating Ofcer,
Engineering & Construction
John Pearson
Chief Operating Ofcer,
New Energy Services
Responsibility
Heads up the Company’s technical
functions, assuring technical excellence
and service quality across Petrofac’s
projects and operations, from engineering
and supply chain, to execution and
commissioning.
Responsibility
Is responsible for all Legal, Compliance
and Company Secretariat functions.
He ensures that the Group’s business
is conducted in accordance with all
applicable laws and regulations.
Responsibility
As Chief Operating Ofcer – E&C, has
overall accountability for strategy and
delivery against our business plan.
Responsibility
Has overall responsibility for advising on
internal and external communications,
including marketing andbrand.
Responsibility
As Chief Operating Ofcer – Asset
Solutions, has overall accountability for
delivery against our business plan.
Responsibility
Has overall responsibility for advising on
all people aspects of the business. This
includes succession planning, talent
management, leadership development,
compensation, performance, diversity and
inclusion, and employee engagement.
Responsibility
As Chief Operating Ofcer – NES, has
overall accountability for growing and
delivering our new energies business plan.
Responsibility
Has overall accountability for quality,
health, safety, security, sustainability and
environment.
Key expertise
Oil and gas
6
Engineering
7
Financial
5
International
10
Regulatory and governance
7
Leadership
10
HSE
8
Operational/strategic management
10
Digital
6
Tareq Kawash and Afonso Reis e
Sousa are also members of the
Group Executive Committee. Their
biographies are set out on page 99.
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Corporate governance report
BOARD LEADERSHIP AND COMPANY PURPOSE
Board governance structure
As a Jersey-registered entity, Petrofac Limited is bound by
requirements set out in the Companies (Jersey) Law 1991.
However, although not required to comply with the UK Companies
Act 2006, our Directors are also informed by UK practice and
wish to act in good faith to promote the long-term success of the
Group.
In determining the Group’s strategic direction, and the
sustainability of the business model, the Board is conscious of its
collective responsibilities to all stakeholders. It seeks to ensure
that the necessary corporate and management structures are in
place for our strategy to be implemented effectively. The Board
seeks to ensure there is an effective governance framework in
place across the Group. It recognises that the Group’s long-
term success depends on a commitment to good governance
standards, with governance an element that should be ingrained in
our behaviours, the way we make decisions and run our business,
rather than simply a compliance metric.
Matters reserved
The Board has a formal schedule of matters reserved for
its decision making and approval. These matters include
responsibility for the overall management and performance of
the Group and the approval of its long-term objectives, strategy,
budgets, material contracts, capital commitments, risk appetite,
the long-term viability statements and key policies. The matters
reserved for decision by the Board are regularly reviewed and
approved by the Board.
Board activities and key focus areas
The main priorities of the Board are to provide leadership
and guidance in support of the Group’s strategic priorities,
with consideration to the Group’s nancial performance. The
Board also focuses on good governance, compliance, and risk
management procedures and processes to ensure they are fully
embedded across the Group and to ensure succession plans
are in place throughout the organisation. The views and differing
perspectives of the Group’s stakeholders are also taken into
account as part of Board discussions.
The Board spent time considering a number of strategic topics
during the year. The key activities of the Board are set out in the
following chart.
Company purpose is central to our
business and, with values that are
embedded within the organisation,
we can create a culture that optimises
performance and delivers results.”
How the Board spent its time
during the year – 2022
Financial matters
19%
Governance
14%
Leadership and people development
1%
Project approvals
1%
Risk management and internal controls
9%
Strategic matters
56%
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GOVERNANCE OVERVIEW FINANCIAL STATEMENTSSTRATEGIC REPORT
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PETROFAC LIMITED | Annual report and accounts 2022
Governance framework
We believe our corporate governance framework underpins good governance practices and enables the Board to provide effective stewardship of the Company.
The Board
Provides leadership and direction to ensure long-term success by setting a sustainable strategy and overseeing its implementation. Provides rigorous challenge to management and ensures
appropriate systems and processes are in place to monitor and manage enterprise risk and internal controls. Is responsible for the nancial performance and overall corporate governance
of the Group, delegating certain matters to its principal committees, which report to the Board at every meeting.
Executive management
Responsible for day-to-day operational management, the communication and implementation of strategic decisions, and administrative matters. Identies and reviews matters for recommendation
to the Board and its Committees. Supported by management committees, including the Group Executive Committee, Third Party Risk Committee, Disclosure Committee, Guarantee Committee
and Group Risk Committee.
Informs
Informs
Reports
Reports
Chair
Leads the Board and ensures
effective communication ows
between Directors, promoting an
inclusive forum to facilitate effective
contribution, challenge, and debate.
Builds a well-balanced Board, with
consideration given to succession
planning and composition. Is
responsible for ensuring effective
board governance, overseeing
the board evaluation process.
Ensures effective communication
with stakeholders, enabling their
interests to be represented at
Board meetings.
Works closely with the Chair, acting
as a sounding board and condant.
Provides support and acts as an
intermediary for other independent
Directors. Meets annually with
other Directors to appraise the
Chair’s performance, and on such
other occasions as is deemed
appropriate. Is available to meet
stakeholders to answer questions
that cannot be addressed by the
Chair or Group Chief Executive.
Senior Independent Director Non-executive Directors
Support executive management,
while providing constructive
challenge and rigour. Bring sound
judgement and objectivity to
the Board’s decision-making
processes, monitor strategy, and
review the integrity of the risk
management framework and
processes, nancial information
and controls, and share the skills,
experience and knowledge from
other industries and environments.
Have prime roles in the Board
composition and succession
planning processes.
Group Chief Executive
Is responsible for the day-to-
day management of the Group.
Implements agreed strategy and
objectives, setting goals and
priorities. Develops proposals to
present to the Board on all areas
reserved for its judgement and
ensures the Board is fully informed
of all key matters. Supported by the
leadership team, has responsibility
for driving execution of the
Group’s strategic aims. Maintains
relationships with key external
stakeholders, including investors,
clients, and governments.
Chief Financial Ofcer
Has primary responsibility for all
aspects of the Group’s nancial
affairs. Ensures the Group has
an effective and a fully compliant
nancial control environment in
place. Develops and implements
the Group’s nance strategy and
funding. Manages the Group’s
nancial risk, with responsibility
for mitigating key elements
of the Group’s risk prole.
Maintains relationships with key
external stakeholders, including
shareholders, lenders, banks,
and credit rating agencies.
Secretary to the Board
Advises the Board on all
governance, legislation, and
regulatory requirements, as
well as best practice corporate
governance developments.
Has responsibility for implementing
the processes designed to
ensure compliance with Board
procedures. Facilitates the
Board evaluation, induction,
and development processes.
Available to individual Directors
in respect of Board procedures
to provide general support
and advice.
Audit Committee
Chaired by: David Davies
Reviews and monitors the integrity of the Group’s
nancial statements; reporting processes; nancial
and regulatory compliance; the systems of internal
control and risk management; and the external and
internal audit processes.
COMMITTEE REPORT ON / Pages 114-122
Nominations Committee
Chaired by: René Médori
Reviews the structure, size and composition of
the Board and its committees. Takes primary
responsibility for succession planning and Director
succession. Identies and nominates suitable
candidates for Board appointments.
COMMITTEE REPORT ON / Pages 111-113
Compliance and Ethics Committee
Chaired by: Francesca Di Carlo
Has oversight responsibilities for all areas relating
to compliance and ethics. Provides assurance that
the Group’s compliance and ethics policies remain
adequate and effective. Promotes the importance
of compliance and ethics.
COMMITTEE REPORT ON / Pages 123-124
Remuneration Committee
Chaired by: Matthias Bichsel
Sets the remuneration policy for Executive Directors
and determines individual compensation levels for
Executive Directors, the Chair, and members of senior
management. Oversees the remuneration framework
for the Group.
COMMITTEE REPORT ON / Pages 125-151
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BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED
Meeting attendance
2022 returned to a more usual year for Board meetings, with six scheduled meetings held,
supplemented with ad hoc meetings to review items of business that needed to be addressed
outside of scheduled meetings. Details of Director attendance are set out below.
Directors engage effectively during meetings, with scrutiny and constructive debate encouraged
and Non-executive Directors able to seek clarication from management where required. Members
of operational and functional management, one and two tiers below Director level, are also routinely
invited to present to the Board on matters under consideration. This allows specic matters to be
brought to the attention of the Board and allows the Board to deepen their understanding at both
local and functional levels, while gaining an awareness of specic nuances that may not always
be obvious in written reports. It is felt this enhances the Board’s knowledge of the business, while
enabling the Directors to consider key individuals who have been identied through the succession
planning process.
René Médori 6(6) 3(3) 4(4) – – –
Andrea Abt
1
2(3) – 2(2) – 1(2) 2(3)
Sara Akbar
2
6(6) 3(3) 4(4) 2(2) – 6(6)
Ayman Asfari 6(6) 3(3) 4(4) – – –
Matthias Bichsel 6(6) 3(3) 4(4) 4(4) 4(4) 6(6)
David Davies
3
6(6) 3(3) 4(4) 4(4) 2(2) –
Francesca Di Carlo
3
6(6) 3(3) 4(4) – 2(2) 6(6)
George Pierson
1
3(3) – 2(2) 2(2) 2(2) –
Sami Iskander 6(6) 3(3) – - – –
Afonso Reis e Sousa 6(6) 3(3) – – – –
2022 Board calendar attendance
DIRECTOR
BOARD
MEETING
(SCHEDULED)
BOARD
MEETING
(AD HOC)
NOMINATIONS
COMMITTEE
AUDIT
COMMITTEE
COMPLIANCE
& ETHICS
COMMITTEE
REMUNERATION
COMMITTEE
1 Ms Abt and Mr Pierson stepped down from the Board at the conclusion of the AGM held in May 2022. Ms Abt was unable to attend the
March 2022 meetings due to a prior engagement.
2 Ms Akbar was appointed as a member of the Audit Committee following the AGM held in May 2022.
3 Ms Di Carlo and Mr Davies were appointed as members of the Compliance and Ethics Committee following the AGM held in May 2022,
with Ms Di Carlo succeeding Mr Pierson as Committee Chair.
Site visits
The Board has historically visited at least one operational site each year, with
the purpose of meeting with local management, project teams and graduates,
while experiencing rst-hand the project development, all with the aim of better
understanding the scale of our operations.
As a consequence of continuing travel restrictions at many of our sites, the opportunity
to arrange a site visit for the whole Board was not feasible. However, individual site
visits by Executive Directors were completed during the year.
Following his appointment as Chief Financial Ofcer on 1 September 2021, Afonso
Reis e Sousa visited many of our ofces and sites as part of his continuing induction.
While on a trip to the Aberdeen ofce, he visited the Seagreen project site, which once
completed, will be Scotland’s largest and the world’s deepest offshore wind farm.
Along with members of the Malaysia management team, he visited our supply base
in Kemaman, as well as a contractor’s fabrication yard on the east coast of Malaysia.
This visit enabled them to present key safety messages to the team and better
understand our warehousing and logistics operations.
During 2022, Mr Iskander and Mr Reis e Sousa each spent time in Algeria, visiting our
local ofces, in addition to the Tinrhert and Ain Tsila project sites. While on site they
discussed the progress of each project as well as the Company’s ambition to grow the
business in Algeria. They both also visited our Thai Oil Clean Fuels Project in Sriracha,
Thailand, touring the greeneld operations and complex browneld work. While in
Thailand, Mr Iskander held a townhall with the Petrofac team where he reiterated the
importance of the project for the community, the Company, and Thailand in general.
For more Board engagement, visit /
petrofac.com/boardengagement
Corporate governance report continued
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GOVERNANCE OVERVIEW FINANCIAL STATEMENTSSTRATEGIC REPORT
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Culture oversight
The Board recognises that
having a dened purpose
and vision, with values
and supporting behaviours
embedded within the
organisation, helps to create
a culture that optimises
performance and delivers
long-term results. The Board
sets the tone regarding the
application of our corporate
values and behaviours,
taking into consideration
the views and interests of all
stakeholders. The Company’s
values articulate the qualities
we wish all employees to
demonstrate, and we aim
for these to be embedded
within all our operational
practices. The Group Executive
Committee is delegated
with the responsibility for
ensuring that the policies
and behaviours set at Board
level are communicated and
implemented effectively across
the Group. During the year,
the Board was satised that
the overarching practices
and behaviours were aligned
with the Company’s purpose,
values and strategy. The Board
monitors the Group's culture
by reviewing the following
insights throughout the year:
AREA LINK TO CULTURE
Employee engagement
MORE INFORMATION / Pages 21, 57
A Workforce Forum was established in 2019 to enable the Board and the Executive team to gauge the mood of the workforce, better
understand their ideas, concerns, and perspective, plus ascertain what it is about Petrofac that motivates and engages them.
This Forum, which meets biannually, allows the Board to converse directly with employees representing different levels, functions,
and geographies, and to provide deeper insights into the everyday realities of employees across the Group.
Townhalls
MORE INFORMATION / Page 21, 57
Townhalls are held across the Group throughout the year. These allow information to be disseminated quickly and enable local leadership
to communicate the right behaviours and cultural expectations. Townhalls were held by Mr Iskander and Mr Reis e Sousa following the
announcement of our full-year and half-year results. Subsequent townhalls were held throughout the business to cascade the information
provided. A further townhall was held by Mr Iskander and Mr Médori at the end of the year with the Executive team to discuss the
challenges facing the organisation.
Globally aligned reward
and incentive schemes
MORE INFORMATION / Pages 140, 220
Our long-term incentive schemes are aligned across the Group and have key targets aimed to drive the right behaviours and values
of our business. The alignment of our compensation and benet plans with our corporate culture enables us to recruit and retain the
best talent.
Health & Safety
MORE INFORMATION / Pages 50-53
Across Petrofac, our aim is for zero safety incidents. We see this as entirely realistic and achievable and are proud to say that much of
the time, we live up to this goal. To maintain our performance, we continually enhance our programme of health and safety measures and
look to rene the way we measure our performance. Safety moments are held at the start of every meeting, with updates on Health &
Safety statistics across the Group presented to every Board meeting. This allows the Board to monitor year-on-year trends and to ensure
that the right practices are being followed. The launch of new applications during the year to make reporting easier and simpler, including
an HSE observation app and a driving improvement app, are helping to effect a culture change by improving the situation awareness of
health and safety matters.
Compliance & Ethics
MORE INFORMATION / Pages 123-124
Our Compliance & Ethics Committee actively reviews Speak Up reports and considers investigations reports and analysis by issue type
at each meeting. This enables Directors to determine any trends or circumstances that may need further analysis or investigation. Code
of Ethics training is compulsory for all new joiners.
Training
MORE INFORMATION / Pages 65-67
All employees are required to complete an annual online training of the Petrofac Code of Ethics to demonstrate their understanding of,
and commitment to, the highest standards of business conduct and ensure that we do business the right way.
Reporting
MORE INFORMATION / Pages 103,
117-118
Reports and updates are provided to every Board meeting on all key contracts, nancial matters and all material legal claims. In addition,
the Audit Committee reviews the internal audit reports, including areas of non-compliance with our internal controls and actions taken to
address any non-compliance, and our key risk reports, at each meeting.
BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED
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Stakeholder engagement
Stakeholder engagement enables the Board to better understand
what matters to each stakeholder group, and recognising their
differing interests is integral to Board discussions and central
to the execution of our strategy. The engagement with each
stakeholder group is discussed in more detail on pages 20 to 23.
The Board places signicant importance on listening to,
and establishing and maintaining good relationships with its
stakeholders. This engagement allows the Board to better
understand the impact of decisions taken on those stakeholders.
It also ensures the Directors are kept informed of signicant
changes in operating environment as well as the broader market,
including the identication of emerging risks and trends, which in
turn can be factored into strategic discussions.
Engaging with employees is valued highly by the Board. Directors
are kept informed on the outcomes of all employee engagement
surveys and are active participants in the Petrofac Workforce
Forum. This continued engagement and the sharing of views
throughout the year provides insight on the realities being faced
by employees across the Group.
Open and constructive engagement with major shareholders and
other investors is also considered vital. It enables the Board to
understand their views on environmental, social and governance
issues, while providing the opportunity to discuss the Group’s
performance against strategy. These discussions not only focus
on delivering increased value, but also assess the potential
impact of decisions on the Group’s wider stakeholder groups.
The Board acknowledges that, when making decisions, it is not
always possible to provide positive outcomes for all stakeholders,
with decisions, on occasion, made based on competing
priorities. In such circumstances, relevant factors are carefully
assessed, with the best interests of the Group, as a whole, taken
into account when a course of action is selected.
This includes the needs of the different stakeholders, as well as
the consequences of any decision in the short, medium and long
term.
Section 172 arrangements
Under Section 172 of the UK Companies Act 2006, company
boards have a duty to promote the success of their company
for the benet of their members as a whole, whilst having
regard for the interests of all stakeholders, including employees,
shareholders, suppliers and customers, the community and the
environment.
As a Jersey-incorporated company, Petrofac is not required to
comply with this legislation. Nevertheless, we are informed by UK
practice and follow the UK Corporate Governance Code which
endorses this rule. In any event, we will always act in good faith
to promote the long-term success of the Group for the benet
of all stakeholders. When making any decisions, each Director is
encouraged to act in the way they consider to best promote the
Company’s success for the benet of its members as a whole,
while having due regard to the Section 172 requirements.
An overview of how and why we engage with key stakeholders
and how we have considered their requirements relating to
principal decisions taken during the year to ensure effective and
continued engagement is set out on pages 20 to 23.
Share capital
The Company’s ordinary shares are quoted on the London
Stock Exchange, and at the date of this report, the issued share
capital (and total voting rights) consisted of 522,049,521 ordinary
shares. Details relating to the rights and obligations attached
to the Company’s ordinary shares are set out in the Company’s
Articles of Association.
The Company may purchase its own shares providing the
shareholder resolution authorising the purchase species the
maximum number of shares, the maximum and minimum prices
which may be paid, and a date, not later than 18 months after
the passing of the resolution, on which the authority to purchase
is to expire. The Company will seek to renew its existing authority
for this, which will expires at the conclusion of the 2023 AGM.
Annual General Meeting (AGM)
Full details of this year’s AGM are set out in the Notice of
Meeting. All resolutions will be conducted on a poll, with the
results announced to the market as soon as practicable after
the meeting. At last year’s AGM, all resolutions were passed,
with votes in support ranging from 74.41% to 99.84%.
Shareholders unable to attend the AGM are reminded that
they can submit questions in advance of the meeting at
agmquestions@petrofac.com.
Investor Relations programme
Constructive engagement with major shareholders and other
investors throughout the year is considered by the Board to
be a critical activity, as this enables the Directors to better
understand their views, while establishing and maintaining good
relationships. Our Investor Relations team acts as the principal
focal point for contact, with an annual programme of meetings
and presentations with existing and prospective shareholders
and other investors, as well as research analysts. Directors also
attend meetings with major shareholders and other investors
throughout the year, to facilitate direct lines of communication
with management and the Board.
The Investor Relations team also conduct sessions with
stakeholders following the publication of our full-year and half-year
nancial results. During 2022, regular dialogue was maintained
with these stakeholders, focusing on key operational matters.
Additional meetings were also held with our corporate brokers
to better understand investor sentiment. Analyst research notes
are regularly circulated to all Directors, with brokers’ reports
submitted to Board meetings. During 2022, approximately
172 meetings were held, with signicant focus given to E&C
operational performance, the future projects pipeline and liquidity.
Governance-specic meetings were also arranged for the Chair
and Senior Independent Director, allowing them the opportunity
to gain insights on governance matters from a shareholder
perspective, and to hear directly from key investors on matters
including succession planning and remuneration.
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Response to shareholder voting less than 80%
Prior to the 2022 AGM, René Médori and Matthias Bichsel
consulted with the Company’s major shareholders and proxy
advisors. While a signicant number of shareholders were
supportive of all resolutions, including the rationale used by the
Committee in determining Executive Directors’ remuneration, it
was recognised that some shareholders did not hold the same
view, with one shareholder concerned with the weighting of the
non-nancial targets used in remuneration outcomes. Having
reected on these comments, greater transparency and clarity on
remuneration outcomes have been provided. The opportunity to
consult again with major shareholders was also taken towards the
end of 2022, as consideration was given to the triennial review of
our Remuneration Policy. The Committee has carefully considered
the views of our key stakeholders, as well as overall Group
performance, in taking decisions on executive remuneration.
Major shareholders
In accordance with DTR 5, information provided to the Company
is published on a Regulatory Information Service at the time
of receipt. The Company has received notication of material
interests in voting rights over the Company’s issued ordinary share
capital. This is set out in the table below:
NAME
PERCENTAGE OF ISSUED
SHARE CAPITAL AS NOTIFIED
AT 31 DECEMBER 2022
Ayman Asfari and family 16.30% 16.28% Direct and indirect
Azvalor
10.04% 14.99% Direct
Schroders plc 14.68% 14.68% Indirect
J O Hambro – 5.31% Indirect
PERCENTAGE OF ISSUED
SHARE CAPITAL AS NOTIFIED
AT 27 APRIL 2023 NATURE OF HOLDING
Shareholders (ownership) by territory
UK 64%
North America 9%
Rest of Europe 24%
Rest of the World 3%
Shareholders’ distribution
Meetings held with shareholders by country
UK 65%
North America 16%
Rest of Europe 15%
Rest of the World 4%
Deeds of indemnity
In accordance with our Articles of Association, and to the
maximum extent permitted by Jersey Law, all Directors and
Ofcers of Petrofac Limited are provided with deeds of indemnity
in respect of liabilities that may be incurred as a result of their
ofce. The Group also has appropriate insurance coverage in
respect of legal action that may be brought against its Directors
and Ofcers. Neither the Company’s indemnities nor insurance
policies provide any cover where a Director or Ofcer was found to
have acted fraudulently or dishonestly.
Disclosures required under Listing Rule 9.8.4R
The information required to be disclosed in accordance with
Listing Rule 9.8.4R of the Financial Conduct Authority's Listing
Rules can be located on the following pages of this Annual report
and accounts:
LISTING RULE DETAIL PAGE REFERENCE
9.8.4R (1-2) - (5-14) Not applicable Not applicable
9.8.4R (4) Long-term incentive
schemes
140-141,149-150
BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED
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DIVISION OF RESPONSIBILITIES COMPOSITION, SUCCESSION, AND EVALUATION
Board roles
The roles and responsibilities of our Directors are set out on page
103. Our Non-executive Directors are encouraged to share their
experience, and each is well-positioned to support management,
whilst providing constructive challenge. All Directors are
encouraged to be open and forthright in their approach as we
believe this helps to forge strong working relationships, allowing
them to make their best possible contribution.
Regular meetings between the Chair and Group Chief Executive
are held throughout the year, allowing general matters to be
discussed and enabling them to reach a mutual understanding
of each other’s views. The Chair and SID also maintain regular
contact between scheduled Board meetings, with time also
set aside at each meeting for the Chair to meet with the Non-
executive Directors without the presence of management.
The relationships between these roles are important, as these
individuals represent the views of both management and
Directors, respectively. The combination of these meetings
ensures that the Chair is fully informed of all views, which assists
in setting agendas and ensures all Directors can contribute
effectively through their individual and collective experiences.
Dealing with potential conflicts of interest
Should a potential conict of interest arise during a term of
appointment, processes and procedures are in place for
Directors to identify and declare any such conict, whether
matter-specic or situational. The Company’s Articles of
Association permit the Board to authorise such conicts, which
can be limited in scope. Notications are required to be made
by the Director concerned prior to or at a Board meeting, and all
Directors have a duty to update the whole Board of any changes
in personal circumstances. During 2022, all conict management
procedures were adhered to, managed and reported effectively.
0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
New energies/renewables
Digital
Operational/strategic
HSE
Leadership
Regulatory and governance
International experience
Finance
Engineering
Oil and gas experience
Board skill set
Board composition
At the date of this report, the Board has eight Directors,
comprising the Chair (who was independent on appointment),
four independent Non-executive Directors, one non-independent
Non-executive Director and two Executive Directors. Their
full biographies are detailed on pages 99 and 100. All Board
appointments are subject to a formal and rigorous procedure led
by the Nominations Committee. Details of the work undertaken
by this Committee during 2022 are set out on pages 111 to 113.
Our two Executive Directors have rolling service contracts,
containing a notice period provision of 12 months by either party.
Our Non-executive Directors each have letters of appointment
that contain a termination provision of three months’ notice
by either party. The terms and conditions of appointment of
all Directors are available for inspection at our registered ofce
in Jersey and at our Corporate Services ofce in London. In
accordance with the UK Code, Directors offer themselves for
reappointment by shareholders at each AGM.
The appointment and replacement of directors is governed by
the Company's Articles of Association. the UK Code, Companies
Jersey (Law) 1991 and related legislation. The Directors may from
time to time appoint one or more Directors to the Board and any
person may be appointed to be a director. Under the Articles,
any such director shall hold ofce only until the next AGM where
they will stand for annual election.
Directors’ skills and experience
Each of our Directors has a varied career history, and
considerable effort has been taken to ensure that the Board
retains the right balance of skills, capabilities, knowledge
diversity, and industry expertise to ensure we are able to run the
business effectively and deliver sustainable growth. The Board
skills matrix below details key skills and experience identied as
necessary for oversight of the Group and the effective execution
of our strategy.
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Board evaluation
The UK Code requires the Board to undertake a formal and
rigorous annual evaluation of its performance and that of its
committees, with a provision requiring that this be externally
facilitated every three years. The evaluation process provides
the Board with an opportunity to consider and reect on how it
operates and the quality and effectiveness of its decision making,
the range and level of discussion, and for each Director to
consider their own contribution and performance.
At the end of 2021, the Chair led an internal review following
completion of an online questionnaire. The results of this review
were presented to the Board in early 2022, with the areas
of focus identied including strategy, ESG, and succession
planning. These areas were discussed and reviewed by the
Board throughout the year.
2022 Board evaluation – review process
In accordance with our three-year cycle, towards the end of
2022, the Board engaged the services of Independent Audit
Limited, which has no other connection to the Group, to conduct
an externally facilitated evaluation.
The robust process involved a review of the year’s Board and
Committee papers plus one-on-one interviews with each
Director, the Secretary to the Board, and members of the Group
Executive Committee and management who regularly interact
with the Board and attend meetings. In addition, representatives
from Independent Audit Limited observed the scheduled
Board and Committee meetings held during November 2022.
Feedback from the evaluation was contained in a report
setting out the observations and recommendations and this is
scheduled to be submitted to, and discussed by, the Board in
early 2023, with Independent Audit Limited in attendance to
answer any questions and facilitate the discussion.
The Board performance evaluation cycle
COMPOSITION, SUCCESSION, AND EVALUATION CONTINUED
2022 Board evaluation – outcome
The external review recognised the formidable challenges that
the Board had faced over the preceding three years, not least
the disruptions caused by the SFO investigation, the Covid-19
pandemic and the ongoing market volatility within the sector.
The Board was recognised to have displayed a number of key
strengths, which had helped steer the Company through these
challenges and were also expected to help them withstand the
current pressures. The process gave credit to the Directors for
facing and dealing with each of these challenges and recognising
the high levels of commitment that had been displayed over the
period.
The review observed that each Director brought a range of
complementary skills to the boardroom, with sectoral and
geographical experience, as well as a broad range of industry
and functional expertise. The Board was considered to be willing
to question management during meetings, while providing
constructive challenge. The contributions received from the
management team is highly appreciated by the Non-executive
Directors.
It was acknowledged that the Board had had a positive impact
on the development of the enhanced compliance processes and
the more practical, rigorous risk management framework. Given
the issues faced in recent years, the Board had shown a no-
compromise commitment to compliance and had helped to set
in motion a positive change in attitudes and culture throughout
the organisation.
The effectiveness of the Chair was also considered as part of the
review. His understanding of the business was recognised, and
he was seen as encouraging discussions and participation during
meetings. Of note was how the Chair was able to handle high-
pressure situations. The experience received from the SID was
also acknowledged and his input on strategy and risk was greatly
valued by management.
The Board Committees were considered to be functioning well,
with each having well-established remits and terms of reference.
Following completion of the external evaluation, the Board
remains satised that it continues to operate effectively and
believes the Directors are performing well and as would be
expected within their relevant roles.
Year 1
2020 internal evaluation
facilitated by the Chair and
Secretary to the Board using
condential self-evaluation
questionnaires. Action
plan agreed and reviewed
throughout 2021.
Year 2
2021 internal evaluation
facilitated by the Chair and
Secretary to the Board using
condential self-evaluation
questionnaires. Results
collated and presented to the
Board in March 2022. Action
plan agreed and reviewed
during the year.
Year 3
2022 external evaluation
facilitated externally.
Conducted at end of 2022,
with the nal report presented
to the Board in early 2023.
Action plan to be
agreed and reviewed
throughout 2023.
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Progress against actions arising from the 2021 effectiveness review
The outcome of last year’s internal evaluation identied areas where the Board might improve and develop, with progress made throughout the year:
Strategy
Focus to be given to clearly dening the medium and long-term strategy
to help stabilise the organisation and restore stakeholder condence.
Key strategic initiatives were considered during the year, with deep-dive
presentations provided by both management and external third parties on
potential actions to enable the business to deliver on the strategy.
ESG
To continue to develop the sustainability strategy and ESG roadmap,
clearly dening the Group’s direction on energy transition. Driving continual
corporate reforms to promote the cultural changes throughout the organisation
to ensure ESG strategy is fully embedded.
The Board reviewed the Company’s strategy and Net Zero roadmap, providing
feedback on the plan. Targets have been set to ensure the ESG strategy can
be fully embedded within the Group.
Succession planning
Review the Board composition, to ensure succession plans are in place
for the immediate and medium term. Give continued focus to leadership
and talent development initiatives.
Signicant focus was given to succession planning throughout the year, not least
as a result of the forthcoming change in Group Chief Executive. Succession and
talent management plans are in place for senior management, with the Nominations
Committee maintaining strong oversight of this process.
THEME AREA FOR RECOMMENDED IMPROVEMENT PROGRESS
The key recommendations arising from the 2022 effectiveness review
The 2022 external evaluation recognised that in the immediate term, the Board’s focus would be on dealing with urgent business challenges. However, areas for focus were identied where improvements
could be made over the coming year. These are set out in the following table:
Board composition
In light of the forthcoming change of Group Chief Executive, planning the timing of the departures of Directors will be important for the Board. Accordingly, a transparent,
systematic, and inclusive selection process will be a focus for the Nominations Committee over the coming years, ensuring candidates with the right skills and attributes
can be identied, and a suitable timeline agreed.
Management
engagement
Further strengthening the relationships between management and the Non-executive Directors to ensure constructive relationships are maintained. Establishing a balance
to harness the experience and insights of existing members of the Board, with the goals and ambitions of new members. Continue to focus on management and talent
development initiatives and further develop succession plans to progress the diversity agenda.
Meeting formats
Improving the quality and cadence of information ows between management and the Board, with consideration to be given to reworking and refreshing the format and
schedule of Board and Committee meetings. Ensuring sufcient time is set aside for key discussion items, while creating sufcient space for reection. Encouraging
Committee feedback on matters that are of most importance to the Group.
Employee engagement
Further development of the workforce engagement arrangements currently in place to ensure the Non-executive Directors gain rst-hand insight as to the culture of the
business and to ensure that the appropriate behaviours are being displayed throughout the organisation. Non-executive Directors to be encouraged to visit different parts
of the business on a more informal basis, including taking part in site safety audits, with a return to the Board's practice of in-person annual site visits.
THEME AREA FOR RECOMMENDED IMPROVEMENT
Corporate governance report continued
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Governance/other 27%
Board composition 31%
Diversity and inclusion 11%
Talent development 31%
Membership:
Chair: René Médori
Committee members:
Sara Akbar, Ayman Asfari,
Matthias Bichsel, David Davies,
Francesca Di Carlo
Resignations during the year
Andrea Abt – resigned May 2022
George Pierson – resigned May 2022
Nominations Committee report
Role and responsibilities of the Committee:
• Review the composition, size and structure of the Board
and its Committees, taking into consideration the skills,
knowledge, experience, diversity of gender, social and
ethnic backgrounds, and cognitive and personal strengths
of Directors
• Identify and recommend for Board approval suitable
candidates to be appointed to the Board, fully evaluating
the balance of existing skills, knowledge and experience
required to support the strategic objectives of the Group
• Consider the effectiveness and rigour of the succession
planning processes for the Group and maintain oversight
of the development of a diverse pipeline for succession to
both Board and senior management roles
How the Committee spent
its time during the year:
Dear shareholder
This report provides an overview of the work of the Nominations
Committee and its activities during the year.
The Committee takes the lead on all Board and Committee
appointments, including the process for identifying and nominating
suitable candidates, to ensure Petrofac continues to have the
right balance of skills, experience, and diversity of thought to help
achieve our strategic objectives.
The Committee monitors the external commitments of the Non-
executive Directors who, from appointment, commit to allocating
sufcient time to discharge their responsibilities effectively. The
Committee also considers potential conicts of interest, external
time commitments, and residency status.
Andrea Abt and George Pierson, having each served on the Board
for two consecutive three-year terms, stepped down at the 2022
AGM. The Committee recognises the signicant contributions they
each made to Petrofac during their tenure and, on the Board’s
behalf, I would like to thank them for their signicant support.
As a result of their departure, the Committee’s membership was
reduced during the year. The biographies for all current Committee
members are set out on pages 99 and 100.
The Company announced in November 2022 that Sami Iskander
would step down as Group Chief Executive at the end of March
2023. The Board acknowledges the invaluable contribution made
by Sami since his appointment to the Board in January 2021,
having overseen the resolution of the SFO’s investigation and the
Group’s comprehensive renancing programme in 2021. He has
reshaped the business, putting it back on a path to growth. On
behalf of the Board, I extend our heartfelt thanks to him for his
unwavering energy, decisive leadership, and passionate ownership
of Petrofac’s strategy.
Following on from the process undertaken in 2020, the search
process to identify Sami’s successor as Group Chief Executive
focused on candidates with the skills and experience necessary
RENÉ MÉDORI
Chair
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for an organisation of the scale, complexity and global nature of
Petrofac and its focus on returning to growth. The prole and
requirements necessary to ll the role were determined, taking
into consideration the current and future needs of the Group.
In addition to operational and commercial expertise, soft skills
were included as part of the required criteria, including critical
assessment, cultural sensitivity, judgement, and the ability to
develop trust and forge new relationships.
Following completion of interviews conducted by the Chair and
all other Non-executive Directors, the Committee unanimously
agreed to recommend the appointment of Tareq Kawash, with
effect from 1 April 2023. His prior experience, knowledge,
impressive EPC track record, business development expertise and
personal strengths were all taken into consideration during the
interview process, and it was agreed by the Committee that he
would be a strong addition to the Board as we embark on the next
phase of our return to growth.
On appointment to the Board, all Directors undertake a detailed,
tailored, comprehensive induction programme, which is
intended to account for each individual’s differing requirements,
concentrating on key focus areas. This ensures Directors
are fully prepared for their new role, taking their background
and experience into consideration. Tareq Kawash’s induction
programme will run throughout the year and full details will be
provided in our 2023 report.
Each of our Directors has a varied career history, and considerable
effort has been taken to ensure that the Board retains the right
balance of skills, capabilities, knowledge, diversity and industry
expertise to ensure we are able to run the business effectively and
deliver sustainable growth. In line with the ndings of our Board
effectiveness review, and supported by their biographies, the
Board believes that the election and re-election at the 2023 AGM
of those Directors standing is in the best interests of the Company.
My own succession continued to be a matter of consideration for
the Committee during the year. In line with policy, I did not attend
those meetings, or parts of meetings, or vote upon matters where
I may reasonably have been expected to have had a conict
of interest or lack of impartiality. I joined the Board as a Non-
executive Director in January 2012, becoming Chair in May 2018.
My tenure on the Board therefore now exceeds the maximum
threshold set out in Provision 19 of the UK Corporate Governance
Code. However, given the recent change of Group Chief
Executive, and following shareholder engagement in early
2023, the Committee has proposed that I continue as Chair
to provide continuity on the Board as Tareq settles into his
new role. It was felt that it would be inappropriate to consider
a change of Chair this year, with the requirements to maintain
a stable and experienced board considered paramount while
the Company continues to rebuild. The formal process to nd a
suitable successor will be headed by Matthias Bichsel as Senior
Independent Director and this will commence during 2024.
Succession planning for senior management also remains
a signicant focus area for the Committee, with specic
consideration given to those employees who have been identied
as high-potential talent from across the Group. In January 2023,
the Board was able to meet with a selection of employees to gain
a deeper understanding of their experiences and the challenges
being faced.
The Board believes that continuous training and development
supports Board effectiveness. The Company is committed
to offering tailored training to provide each Director with the
necessary resources to refresh, update and enhance their skills,
knowledge, and capabilities. With the ever-evolving regulatory
landscape in which the Group operates, it is critical that the
Board remains aware of recent and upcoming developments in
the wider legal and regulatory environment. The Secretary to the
Board regularly updates the Board on the governance, legislative
and regulatory matters that may impact the Group and, where
relevant, briengs from external advisors on a variety of strategic
and signicant topics are provided. This year, our Board evaluation
process was externally facilitated and details on the actions arising
from this review are set out on page 110.
The progression of emerging talent is reviewed on an annual
basis, not only to check that appropriate processes are in place to
identify, monitor and develop future potential leaders, but also to
allow the Committee to discuss such talent on an individual basis.
This review process is integral to the Group’s strategic plans, with
a principal objective for the Committee to build a strong, resilient
and diverse talent pipeline, which is in line with Petrofac’s purpose
and values. Focus also remains on developing employee skills and
capabilities for the future, with the aim of strengthening the talent
pipeline and further developing our succession plans.
Diversity and inclusion continue to be focal points for the
Committee. It considers them to be signicant factors in the
Company’s success, as we believe that an inclusive and diverse
workforce promotes safety, productivity and wellbeing, and
underpins our ability to attract and retain employees.
Throughout the year, the Committee continued to provide
oversight to ensure effective strategies are in place that will
develop and strengthen our talent pipelines and promote a
culture that upholds the Group’s principles of inclusion, diversity
and equality. We believe this will support the delivery of our
strategic objectives and allow us to attract a diverse talent base
reective and representative of our core geographies and of the
communities in which we work.
Petrofac remains committed to not only helping improve the levels
of female representation throughout the Group and addressing the
gender imbalance, but to developing a diverse workforce and an
inclusive working environment, irrespective of gender, race, colour,
religion, sexual orientation or marital status. The aim is to create
a workplace that celebrates the diversity of all its employees and
stakeholders.
The Board showed its support to the #BreaktheBias pledge
in March 2022. Aiming to show solidarity and commitment
to forging a gender-equal world that is free of bias, where
difference is valued and celebrated.
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Nominations Committee report continued
The Committee recognises the numerous initiatives that have been
implemented over the year to address diversity and inclusion and
to shine a spotlight on the importance of cultivating an inclusive
culture across the Group. Our diversity awareness programme
continued throughout 2022, with many initiatives introduced to
promote and drive the diversity agenda and develop our diversity
strategy. We were particularly pleased to see progress in hiring
and developing many local nationals in a number of markets
around the world. Further details of these successes can be found
on pages 56-58.
While signicant improvements are being seen, the Committee
acknowledges that work remains to be done, at Board and
senior leadership level, as well as across the organisation.
Notwithstanding that engineering and construction continue to be
predominately male-dominated professions, we are determined
that further progress can be made in this area over the coming
years. While we appreciate there are long-term challenges to
overcome, we are pleased with the improvements that have been
made in respect to gender diversity within the Group’s talent
pipeline. Further information on our approach to diversity and
inclusion and the initiatives taken throughout 2022 are set out on
page 56 to 58.
The Committee acknowledges the recent policy statement issued
by the FCA regarding changes to the Listing Rules (LR 9.8.6R(9)),
which relate to enhanced disclosures in gender and ethnic
diversity at board level. The changes recommend that boards and
leadership teams have a minimum of 40% women by the end of
2025, and further, that at least one of the roles of Chair, SID, Chief
Executive or Chief Financial Ofcer is held by a woman. These
changes take effect for nancial years beginning on or after 1 April
2022 and will be on a comply or explain basis.
While these new requirements are not applicable to the Company
for this reporting period, the Committee is cognisant of the
changing regulatory landscape on gender and ethnic diversity
and is mindful that changes will be necessary in the future for
the Company to comply fully. The Committee is aware that it is
unlikely that the set targets will be met by the Board in the short
term. However, as vacancies in the key roles identied become
available, additional consideration will be given to these gender
and ethnic requirements, while ensuring the right blend of skills,
expertise, commitment and experience is maintained when
suitable candidates are selected, especially taking into account the
challenges and opportunities facing the Group.
Our Diversity and Inclusion policy, the purpose of which is
to ensure equality of opportunity and fairness in all areas of
employment, has been in place across the Group since August
2016. Our policy allows us to value the diversity of our employees,
while promoting an inclusive culture across the Group. In light
of the Listing Rule changes, the Committee will consider a new
Board Diversity Policy during 2023 to set out our objectives and
aspirations in relation to diversity and inclusion.
An overview of our progress against the FTSE Woman Leader
Review recommendations over the last three years are set
out below:
2020 30%
2021 30%
2022 25%
2020 19%
2021 26%
2022 26%
Women on the Board Women in senior roles
In terms of ethnicity, Petrofac is a truly diverse organisation,
with more than 85 nationalities employed across the Group.
Towards the end of 2021, we launched the voluntary collection
of Ethnicity Data reporting in the UK. To date, over 41% of our
UK workforce has responded, with 9% identifying as BAME
1
. The
Board also remains in full compliance with the recommendation of
the Parker Review (Review), with four of the eight Directors on the
Board falling within the Review’s methodology classication
2
.
My fellow Non-executive Directors and I were pleased to be
able to attend the Petrofac Workforce Forum twice during 2022,
and met individual representatives. This Forum continues to
develop and remains a benecial source for Directors to hear
directly from employee representatives, particularly concerning
the continuing challenges facing the business. The Committee
remains committed to engaging with employees to understand
their concerns and to ensure the appropriate culture is in place
across the organisation. The Committee also receives feedback
from employees through the PetroVoices annual survey. Further
details on our employee engagement are set out on pages 21, 51
and 57.
During 2023, the Committee’s focus will again be on overseeing
our talent pipeline and succession initiatives. We will continue to
monitor the developments arising from evolving best practice and
will oversee the necessary actions that will enable us to meet our
diversity targets.
RENÉ MÉDORI
Chair
27 April 2023
1 Those individuals who identify as Black, Asian and minority ethnic.
2 Those individuals with evident heritage from African, Asian, Middle-Eastern and South
American regions.
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Audit Committee report
DAVID DAVIES
Chair of the Audit Committee
Dear shareholder
I am pleased to present this year’s Audit Committee report, which
provides an insight into the Committee’s discussions and focus
during another eventful year.
At the AGM in May 2022, George Pierson stepped down from the
Board. As a result, Sara Akbar was appointed to the Committee
to replace him. I would like to thank George for his valuable
contributions during his time on the Committee and extend a
warm welcome to Sara.
The Committee has had a busy agenda throughout 2022 which
allowed it to discharge its responsibilities via rolling standing items
and also provide sufcient time for discussion of ad hoc matters
that have arisen. This report provides understanding into key areas
considered by the Committee in relation to nancial reporting and
associated key judgements and estimates, risk management,
internal control, the internal audit function, and interaction with
Ernst & Young LLP (the Group’s external auditor).
Traditional topics addressed during 2022 included: the going
concern and viability statements; key judgements and estimates;
continued review of key nancial controls and risk management
processes; deferred taxes and potential uncertain tax exposures;
treatment of separately disclosed items; planning the audit tender
process; and the continued monitoring of ongoing audit and
governance reforms.
Throughout the year, the assumptions and evidence supporting
the going concern and viability statements were reviewed and
challenged extensively. Financial models of scenarios prepared by
management demonstrating the ongoing operational challenges,
including the impact of pandemic-related cost increases in the
business over the assessment period, as well as the liquidity
position of the Group, the principal risks, the level of headroom
against committed facilities and compliance with nancial
covenants, were all considered by the Committee. The protracted
effects of the Covid-19 pandemic continued to impact the
business, as additional costs incurred on legacy contracts due
Financial statements and reporting 32%
External auditor 19%
Risk management, internal control 32%
and going concern
How the Committee spent
its time during the year:
Role and responsibilities of the Committee:
• Monitors the Group’s financial reporting processes. It
reviews and submits recommendations to the Board and
challenges, where necessary, the integrity of financial
statements, including key accounting judgements and
estimates, and narrative disclosures
• Advises the Board on how it has discharged its
responsibilities and considers whether the annual report
and accounts, taken as a whole, is fair, balanced and
understandable
• Considers reports from the external auditor and
management’s response to any recommendations. It also
assesses the effectiveness of the external auditor,
considers their appointment, independence, approves the
remuneration for audit services and monitors the provision
of non-audit services and associated fees, developing and
implementing the associated non-audit services policy as
necessary
• Reviews the Group’s assessments of going concern,
longer-term prospects and viability
• Reviews and monitors the Group’s internal controls
framework, risk management processes and the
effectiveness of the Group’s internal audit function,
including key financial, operational and compliance
controls, and the identification and assessment of
emerging and principal risks, providing assurance to the
Board
• Monitors risk exposures and future risk strategy, including
the strategy for capital and liquidity management, IT risks
(including data privacy and cyber risks) and climate-related
risks
Governance matters
13%
Other
4%
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Membership:
Chair: David Davies
Committee members:
Matthias Bichsel
Sara Akbar – appointed May 2022
Resignation during the year
George Pierson – resigned May 2022
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to extended schedules have not been fully recovered from our
clients, resulting in net cost overruns. The Committee questioned
management and sought assurance on the adequacy of the
contract contingencies included in forecast costs to complete any
current projects. Taking into consideration the detailed analysis
undertaken, the Committee was satised that the going concern
and viability statements remained appropriate.
Disappointingly, there are a number of prior year adjustments
reected in the nancial statements, the most signicant of which
is in respect of the Thai Oil Clean Fuels contract. The error was
identied by the Group’s controls and governance framework
through the Group’s Internal Audit function which indicated a
deciency in the internal controls of this complex project. It was
detected that the subcontractor cost evaluation team did not
escalate at the appropriate time the indications of cost growth
following a bills of quantities review, and therefore appropriate
evaluation had not occurred ahead of the issuance of the 2021
nancial statements.
Following the Internal Audit ndings, the Group’s Investigations
Team (assisted by Deloitte) concluded that the error occurred as
a result of poor judgement within the project team rather than any
intention to mislead. The resulting prior year adjustment of US$48
million (represented by a reduction in revenue of US$19 million and
an increase in cost of sales of US$29 million) has been reected
in the comparative income statement in this year’s consolidated
nancial statements.
On concluding the investigation, the Group undertook additional
assurance activities to satisfy itself that there were no other similar
occurrences within the broader E&C portfolio These assurance
activities consisted of specic detailed contract reviews to ensure
that all material cost increases, or indicators of such, had been
reected in the contract forecasts at the appropriate time; and
conrmations from the project directors of each contract and
from E&C management that any information identied post year
was appropriately included in the contract cost forecasts and, if
necessary, reected in the nancial statements (see the principal
risks and uncertainties disclosures on page 85, the Financial
review on page 93 and note 2.9 to the consolidated nancial
statements).
In September 2022, the Group’s nancial statements for the
year ended 31 December 2022 were subject to a review by the
Financial Reporting Council’s (FRC) Corporate Reporting Review
Team (CRRT). The response by the Company to the request for
information was discussed with me in my capacity as Chair of the
Audit Committee, prior to responding to the CRRT. Additionally,
details of the enquiry raised by the CRRT and the Company’s
response thereto were also considered by the Committee. As
noted on pages 84 and 189 of this annual report, this review
resulted in some classication and presentational prior year
adjustments being made to the Group's consolidated income
statement, and statement of cash ows, and the Company's
statement of cash ows for the year ended 31 December 2021.
Full details (including other prior year adjustments identied) are
included in note 2.9 to the consolidated nancial statements on
page 189. The CRRT has closed its enquiries.
Additionally, the Company agreed to enhance disclosures in a
small number of areas in response to the review. The Committee
is satised that the proposed enhancements have been
appropriately incorporated in this annual report.
As part of its oversight of compliance with applicable legal and
regulatory requirements, the Committee discussed with the
Chair of the Compliance and Ethics Committee and the Chief
Compliance Ofcer the effectiveness of the risk management
framework and system of internal controls as well as consideration
of ethics and compliance matters.
A key role of the Committee is to provide positive assurance to
the Board that it is satised that the Annual report and accounts,
when taken as a whole, are fair, balanced and understandable
and provide shareholders with the sufcient and appropriate
information to enable them to assess the Group’s position,
performance, business model, and strategy. Our review process,
which conrms the Committee is content to provide this
assurance, is set out on page 120.
Looking ahead, in addition to fullling its normal programme of
activities during the year, the Committee will be closely monitoring
the macroeconomic and other conditions affecting the Group’s
strategy and pipeline. The Committee will continue to maintain its
focus on signicant judgements and estimates impacting nancial
reporting whilst work will also continue to ensure the Group is fully
compliant with any new regulations as and when they come into
force.
I would like to thank my fellow Committee members, other
Directors and the management team, and the internal and external
auditors for their continued support, for the open discussions
held, and for the contributions provided in the support of the
Committee’s work throughout the year.
DAVID DAVIES
Chair of the Audit Committee
27 April 2023
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Role of the Committee
The Committee supports the Board in fullling its responsibilities
regarding the nancial statements, effectiveness of risk
management and internal controls, and compliance matters. The
Group has an internal control and risk management framework
in place, which includes policies, standards and procedures, to
ensure that adequate accounting records are maintained, and
transactions are accurately recorded. In addition, the Committee
has oversight of nancial initiatives that remain under continuous
review, which are designed to strengthen our control environment
and improve nancial reporting. This ensures that the Group’s
nancial reporting process and communications to the market
provide a fair, balanced and understandable assessment of the
Group’s performance, position and prospects.
The Committee keeps the Board informed of its activities and
recommendations, with the Audit Chair providing an update to
the Board after every meeting. The Committee discusses with
the Board where it is not satised with, or believes that action
or improvement is required concerning any aspect of nancial
reporting, risk management and internal control, compliance or
audit-related activities. The Committee’s Terms of Reference are
available on the Petrofac website, petrofac.com.
At the date of this report, and throughout 2022, the Committee
comprised independent Non-executive Directors who are all
considered appropriately qualied and experienced to full their
duties having held senior roles across several sectors. David
Davies has signicant, recent and relevant nancial experience,
whilst Matthias Bichsel and Sara Akbar have competence
relevant to the Group’s sector. Members have also gained further
knowledge and experience of the sector as a result of their Board
membership and through various in-person and virtual site visits
since their respective appointments. Furthermore, all members
of the Committee have extensive general management and
commercial expertise. Their full biographies can be found on
pages 99 to 100.
Frequency of Audit Committee meetings
The Committee met ve times during 2022. For the Directors’
attendance, see the table on page 104. Invitations to attend
meetings are normally extended to the Group’s external auditor,
the Chair, the Group Chief Executive, the Chief Financial Ofcer,
other members of the Board, the Group General Counsel, the
SVP – Finance, the Director of Group Finance, the Head of Audit
and the Chief Compliance Ofcer. The Committee also meets with
the external auditor and the Head of Audit without management
present.
Further details on the division of Board responsibilities and the
Committee’s role in complying with the UK Code are set out on
page 98 and 103. The Committee’s key areas of responsibility are
detailed below, and further discussion of activities in 2022 can be
found on page 119.
Group external auditor
Ernst & Young LLP (EY) continued as the Group and Company’s
global external auditor throughout 2022.
The Committee considers the effectiveness of the external auditor
on an ongoing basis, considering its independence, expertise,
performance and understanding of the Group, its resourcing
capabilities, culture and objectivity. The Committee remains
satised, through its own observations and enquiries, as well as
the interactions with the Executive team and senior management
throughout the year, with the independence and objectivity of the
external auditor and the effectiveness of the audit process.
In making this assessment, the Committee gave due consideration
to: (i) views and recommendations from management and the
Head of Audit; (ii) the execution of the audit plan; and (iii) the
Committee’s own experiences, including interactions with the
external auditor, throughout the year. Key criteria of the evaluation
included: professionalism in areas including competence, integrity
and objectivity; constructive challenge of management and key
judgements; efciency, covering aspects such as service level
and innovation in the audit process; thought leadership and value
added; and compliance with relevant legislative, regulatory and
professional requirements.
The Committee Chair met with the external auditor ahead of each
scheduled meeting, without management present, to discuss
a range of nancial reporting and internal control matters. The
Committee Chair also maintained regular contact with the lead
audit partner throughout the year outside of the formal meeting
schedule, discussing formal agenda items ahead of upcoming
meetings and reviewing any other signicant matters.
Each year, EY submit their proposed audit strategy and scope,
thereby ensuring the audit can be aligned with the Committee’s
expectations. This work is carried out with due regard to
the identication and assessment of business and nancial
statement risks that could impact the audit as well as continuing
developments within the Group.
During 2022, the audit scope included management’s
judgements and estimates concerning xed-price engineering,
procurement and construction contracts; the identication and
rectication of deciencies in internal controls; robustness of
management’s going concern and viability statement assessments
and disclosures; impairment assessments and fair value
remeasurements; HMRC’s challenge to the historical application
of national insurance contributions; uncertain tax treatments and
presentation of the separately disclosed items. Towards the end
of the year and into the early part of 2023, signicant work was
undertaken to review the investigation related to the Thai Oil Clean
Fuels contract that resulted in the prior year adjustment, as well as
the additional assurance activities introduced thereafter.
Audit tenure
The next competitive audit tender process is required no later
than 2024, with EY required to step down, having completed
its 20-year audit limit, as permitted under the provisions of The
Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014 (the Order). To provide for
Audit Committee report continued
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sufcient continuity over the audit process prior to the expiration of
their audit tenure, it was agreed that the lead partner responsible
for the external Group audit should rotate during the year, with
Mr Daniel Trotman duly appointed.
Petrofac last conducted a competitive tender process in 2016
and, following completion of that exercise, the Committee
recommended that EY be retained as the Company’s external
auditor. In making this recommendation, the Committee
concluded that the decision was in the best interests of the
Company and its shareholders.
EY was rst appointed as external auditors in October 2005 and
the last year they will be permitted to act as external auditor for
the Group and Company will be 2024. This matter was further
considered during the year, with the Committee agreeing that the
tender for a new auditor should take place during 2023 or 2024.
It was recommended that EY be retained until the end of their
term in 2024, with new auditors shadowing EY for the 2024 audit.
Non-audit services
To preserve the independence and objectivity of the external
auditor, the Group has a non-audit services policy that restricts
the nature of non-audit services that can be provided by the
external auditor. This policy was last reviewed and amended in
2020 to reect the FRC’s latest Ethical Standards and the more
restrictive list of services that are now permitted for an equivalent
UK company with a premium listing. The policy provides clear
denitions of the services that our external auditor may and may
not undertake. A summary of this policy is set out below, while a
copy of the full policy can be found at petrofac.com.
To ensure compliance with the policy, the Committee reviews the
Group’s cumulative non-audit expenditure each year and gives
prior approval to the appointment of EY before any work is carried
out should the nature or size of the proposed work require it. The
Committee is satised that EY’s objectivity and independence was
not impaired during the year by any non-audit service agreements
and conrms there were no breaches to the policy during 2022.
In addition, EY has conrmed that it was compliant with FRC
Revised Standard 2019 in relation to the audit engagement.
Service provided
Fees in 2022
(US$m)
Fees in 2021
(US$m)
Group audit fee 4 3
Audit of subsidiaries’ accounts 1 1
Other including non-audit services – 2
Total 5 6
In 2022 EY received total fees of US$5 million (2021: US$6 million)
consisting of US$5 million of audit fees (2021: US$4 million), and
US$0.1 million for non-audit and audit-related services (2021:
US$1.5 million). The total of EY’s non-audit and audit-related
service fees in the year equated to 2% of the audit fees for 2022
and 3% of the average audit fees for the last three years. Fees
paid to EY are set out in note 5 to the nancial statements. Details
of any signicant non-audit work undertaken this year are set out
in the table above.
All engagements during 2022 were pre-approved by the Chief
Financial Ofcer or by the Chair of the Committee and did not
include any activities dened as prohibited services by the Group’s
non-audit services policy. In addition, and in parallel, EY performed
similar safeguarding procedures to ensure that the proposed non-
audit engagements could be accepted.
Non-audit services policy summary:
• There is a general prohibition on the provision of non-audit
services by the Group external auditor (and its network) which
will apply to Petrofac Limited and its subsidiaries. A narrow list
of permitted non-audit services will continue to be allowed
• Certain non-audit services are subject to an absolute prohibition
• Permitted non-audit services (other than those required by
national legislation) provided to Petrofac Limited and its
subsidiaries are subject to a 70% cap (the Cap)
• The Cap is defined as permitted non-audit fees (other than
those required by national legislation) expected to be incurred
in the current financial year not exceeding 70% of the average
Group statutory audit fees for the previous three financial years
• If the Cap is expected to be breached, the Audit Committee
must be informed in advance to ensure that enhanced
procedures are performed to obtain assurance on the Group
external auditor’s independence and objectivity (as defined by
reference to the FRC’s Revised Ethical Standard 2019)
• All permitted non-audit services are subject to the prior
approval of the Committee in advance of work commencing,
subject to limited exceptions
• The CFO’s approval is required prior to engaging the Group
auditor on any pre-approved permitted non-audit services
• Committee pre-approval for permitted non-audit services is
given where the estimated engagement fee in any one financial
year is below US$50,000
• All services with estimated fee levels above the US$50,000
threshold must be sent to the Committee for approval prior to
commencement of the engagement even if defined as
permitted non-audit services
• The CFO will ensure that a full list of permitted non-audit
service engagement, associated fees and continued
compliance with the Cap is presented to the Committee every
six months unless the Cap is expected to be breached
• The Audit Committee will seek assurance at least once a year
from the Group auditor on its policy and safeguards to maintain
independence and objectivity
Internal Audit
The Head of Audit reports directly to the Committee and
administratively to the CFO, with a remit to provide independent
and objective assurance on the Group’s prioritised risks, internal
control systems and governance processes. The Internal
Audit function supports the Group’s continuous efforts to
improve its overall control framework. It plays an integral role
in the governance structure and provides regular reports to
the Committee on the effectiveness of governance, systems,
processes and controls across the Group. Its activity is primarily
driven by an agreed risk-based programme that reects the key
risks the Group faces, the governance frameworks, organisational
structures and operations. Following approval by the Committee,
the programme remains under review and subject to change
throughout the year to ensure any changes to the risk prole or key
drivers are appropriately considered. The Committee reviews and
approves all changes to the programme and receives updates at
each meeting on the outcome of the work performed.
Reports to the Committee and discussions cover any signicant
matters arising from the internal audit programme and
management’s response to signicant audit ndings and notable
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control weaknesses, including planned improvements and agreed
actions. The Committee also regularly holds private sessions
separately with the Head of Audit without members of management
present. The Head of Audit has direct access to the Committee
Chair and meets with the Group's external auditor whenever
required.
The 2023 risk-based audit programme and additional assurance
activities were reviewed and approved in November 2022. The
Group’s internal audit programme for 2022, approved by the
Committee in November 2021, was further developed during
the year. These developments considered the Group’s principal
risks, identifying where they primarily occur in the business;
through discussions with the Committee and senior management;
recognising changes in the Group and the external environment;
and with consideration to prior audit coverage. Furthermore, the
Committee also approved the Internal Audit Charter which denes
the accountabilities for conducting risk-based audit activities,
ensuring transparency and a clear line of separation to preserve the
independence of Internal Audit from the business.
One of the Committee’s key roles is to challenge this audit
programme, and specically to determine whether the key risk
areas identied as part of the risk management processes are
being audited with appropriate frequency and depth. Following the
completion of each planned audit, Internal Audit seeks feedback
from management and reports to the Committee on the ndings
of the audit, detailing progress, and including any key ndings
or actions that may be required. Where any signicant areas of
concern are identied during an audit, an implementation plan is
agreed with management for any required corrective actions to be
addressed on a timely basis, with follow-up audits arranged. Action
closures are reported to, and monitored by, the Committee.
The Committee keeps the Board informed of its activities and
recommendations, with the Audit Committee Chair providing an
update to the Board after every meeting. The Committee discusses
with the Board where it is not satised with or believes that action
or improvement is required concerning any aspect of nancial
reporting, risk management and internal control, compliance or
audit-related activities.
During 2022, 13 internal audit assignments were carried out, the
results of which were included in Internal Audit’s annual assessment
of the audited elements of the system of internal controls.
To assist Group Compliance, Internal Audit continued to support in
the triaging of allegations raised from the condential Speak Up line,
providing support tothe relevant investigations based on specic
requests from Group Compliance.
Risk management
The Board has overall responsibility for establishing and setting
the Group’s risk appetite, its enterprise risk arrangements and for
ensuring that the Group has in place an effective risk management
framework. In accordance with guidance set by the FRC, the
Board has delegated responsibility for monitoring and reviewing
the integrity and effectiveness of the Group’s overall systems of risk
management and internal controls to the Committee.
The Board has established an organisational structure with clear
operating procedures and dened delegated authorities, which
forms the framework for determining risk and risk appetite.
Regular reporting supports and develops the continuing robust
assessments of the principal and emerging risks facing the Group,
including their impacts on the enterprise and its future sustainability.
The Group’s principal risk report captures and assesses the
principal and emerging risks facing the Group, outlines how these
risks are managed, and monitors exposures against our risk
appetite. This document is updated quarterly and is considered at
both Committee and Board level throughout the year.
The Committee receives regular updates on risk management from
the Group Risk and Audit teams. Additional reports are also submitted
by the external auditor to assist the Committee, and ultimately the
Board, in their annual assessment of the effectiveness of the Group’s
risk management and system of internal controls. In reviewing each of
the submitted reports, the Committee considers how effectively risks
have been identied; how they have been mitigated and managed;
whether actions are being taken promptly to remedy any failings or
weaknesses; and whether the causes of any failings or weaknesses
have indicated poor decision-making, a need for more extensive
monitoring, or a reassessment of process effectiveness.
These help to provide the Committee, and ultimately the Board,
with a balanced assessment of the Group’s principal risks and
the effectiveness of the systems of internal controls. Based on
this assessment, our risk management framework and processes
operated as expected during the year to identify and assess
possible responses to the principal risks and uncertainties faced by
the Group.
Throughout the year, the Group’s principal risks have been regularly
reviewed by management to provide assurance on the robustness,
integrity and effectiveness of the systems in place, including
those that could threaten its business model, operations, future
performance, solvency and liquidity. Further details of the Group’s
risk management systems and controls, including an overview
of the risk governance and management frameworks and key
changes to the principal risks during 2022, are presented on pages
76 to 87.
Internal controls
Petrofac seeks to ensure that a sound system of internal controls,
based on the Group’s policies, standards and procedures, remains
in place for all material associate and joint arrangement entities. In
the event any failings or weaknesses are identied in the course
of a review of internal control systems, management puts in place
robust actions to address these on a timely basis, with action
closures reported to and monitored by the Committee.
As with all companies, an internal control system can provide only
reasonable and not absolute assurance against material nancial
misstatement or fraud, as it is designed to manage rather than
eliminate the risk of failure to achieve business objectives. However,
the Committee is content that the ongoing reviews have established
that management places a strong focus on closing audit actions
and ensuring timely completion.
Following identication of an internal control deciency during the
year, as detailed on pages 114 and 115, additional assurance
activities were undertaken to ensure there were no other similar
instances within the broader contract portfolio (see note 2.9). These
assurance activities conrmed that there were no such occurrences.
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Principal matters considered during the year by the Audit Committee
The Committee met ve times during the year, with meetings coinciding with key points in the nancial reporting cycle.
The principal matters reviewed and considered were as follows:
Financial statements
and reporting (including
going concern)
• Received reports from the Executive team and senior management on accounting (including the principal accounting matters and details of the prior year adjustment
included in the financial statements and the additional assurance activities undertaken in response to the investigation that resulted in those adjustments), commercial,
financial, revenue recognition, risk and risk mitigation, strategic and litigation matters (see also ‘Other’ below)
• Reviewed and recommended the Annual report and accounts to be put to the Board for approval that, as a whole, they complied with the Code principle to be ‘fair,
balanced and understandable’
• Reviewed and recommended the press releases to be put to the Board for approval relating to the full-year and half-year results and financial statements
• Approved the Group’s viability and going concern statements
External auditor
• Reviewed the Group’s external auditor’s 2022 audit strategy and planning report
• Reviewed the external auditor’s reports on the Group’s full-year financial statements
• Discussed, reviewed and approved the external auditor’s assessment of its objectivity and independence, including a review of any non-audit services provided plus
associated fees
• Reviewed management representation letters relating to the full-year audit
• Approved the external auditor’s statutory audit fee for the year
Risk management and
internal controls
(including Internal Audit)
• Considered, discussed and challenged the Internal Audit reports presented at each meeting
• Reviewed and approved the internal audit plan for the year
• Reviewed and approved the Anti-Money Laundering control framework
• Reviewed the periodic progress reports regarding due diligence around controls relating to third-party engagement
• Reviewed the Group’s principal risks and risk appetite
• Reviewed the Treasury Risk Management Policy
Governance
• Reviewed the Committee’s terms of reference and recommended they be approved by the Board
• Received an update from the Group external auditor on the changes to be introduced in the audit and governance landscape
Other
• Received and challenged judgements made by the Executive team and senior management on the adequacy of provisions required on loss-making contracts and the
appropriateness of the related disclosures, including any impact resulting from the prior year adjustments
• Reviewed and recommended for Board approval the annual tax update
• Reviewed and recommended for Board approval the 2022 Group insurance programme renewal
• Reviewed and considered the Company’s responses to the request for information from the FRC’s CRRT
Committee planned activities for 2023
In addition to standing items the Committee will also:
• Continue to challenge and debate the relevance of management’s judgements on significant accounting issues, to safeguard the interests of shareholders and other stakeholders
• Review the Group’s structure for opportunities to simplify
• Maintain a robust overview of the going concern and viability statements
• Complete the audit tender planning process
• Monitor and implement any audit reform recommendations
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Treasur y
As part of its remit, the Committee supports the Board in
monitoring performance against the Group’s funding plan, as
well as reviewing the Group’s compliance with the Treasury Risk
Management Policy, a copy of which is available at petrofac.com.
During the year, the Committee continued to closely monitor the
Group’s funding and liquidity, particularly in light of the ongoing
challenging market conditions facing the Group and the resulting
effect on nancing.
Assurance
At the year end, and as required by the UK Code, formal
assurance is provided to the Board that effective governance,
risk management and internal control processes are in place and
remain relevant, to ensure that the Group will continue to be viable
for at least the next three years. This assurance covers all material
controls, including strategic, nancial, operational and compliance
controls. Further details on the overall control processes are set
out on page 118.
Insurance programme
Petrofac utilises the insurance market, as a risk transfer
mechanism, to cover the types of insurable risks normally
associated with an energy services provider, operating in similar
challenging territories across the world. The cover procured is
structured under a Group-wide insurance programme, designed to
avoid potential coverage gaps and duplication across the Group,
whilst also ensuring that the Group benets from economies of
scale. The effectiveness of the various global insurance policies
is continually challenged against business activities, to ensure
that the insurance cover will respond to our ever-changing risk
exposures. This stress-testing also provides additional certainty
that our cover remains as wide as commonly available across the
insurance market, whilst continuing to represent a cost-effective
risk transfer solution, considering variousfactors, including policy
limits, deductible levels and policyconditions.
Ahead of the 2023 group insurance renewal, a structured and
targeted marketing exercise concerning the main Group policies
was undertaken. After several years of a highly challenging
insurance marketplace in which insurers have grappled with
unprotable loss ratios by applying blanket rate increases, in
2023 insurance markets appear to be settling down for many of
the classes of cover. The Group’s insurance programme was
renewed in April 2023 and the overall premium represents a
reduction of 13% when compared to 2022.
Fair, balanced and understandable
Each year, the Committee advises the Board on whether, in its
opinion, the Annual report and accounts (Annual Report) when
taken as a whole is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Group’s position, performance, business model and strategy.
Throughout 2022, the Committee monitored the integrity of the
Group’s reporting process and nancial management, considered
the results of management’s assessment of going concern and
viability, reviewed in detail the work of the external auditor, and
ensured it and any signicant nancial judgements and estimates
made by management provide the information necessary for
stakeholders to assess the Group’s performance and position.
In reaching its conclusion, the Committee assessed the results of
the processes undertaken by management to provide assurance
that the Group’s nancial statements were fairly presented. The
processes included a review of all material matters to ensure that
the Annual Report correctly reected the Company’s performance
during the reporting year. Material issues were fairly reected,
including the identication and rectication of deciencies in
internal controls and the continuing impact of the Covid-19
pandemic on the projects’ nancial performance, to ensure it
presented a consistent message throughout.
This process was led by an internal team, consisting of
members of the Group Finance, Company Secretariat, Group
Communications and Investor Relations teams, who each
collaboratively prepare sections of the Annual Report. This
team also performed procedures to provide assurance to the
Committee that the Annual Report was balanced, complete and
accurate. This ensured that there was a clear and integrated
link between the three main sections of the Annual Report –
the strategic report; the governance report; and the nancial
statements.
Each Committee Chair participated in the preparation of their
individual committee report, with the Board and management
afforded the opportunity to submit their comments during the
preparation process. The Committee was then presented with a
full and nal draft of the Annual Report for comment.
The Committee concluded that following its review, it was
content to present the 2022 Annual Report to the Board for nal
approval with an assurance that when taken as a whole, it was
fair, balanced and understandable, representative of the year
under review, and provided shareholders with the sufcient and
appropriate information to enable them to assess the Group’s
position, performance, business model, and strategy.
The Board subsequently approved the Committee’s
recommendation that a fair, balanced and understandable
statement reecting this conclusion could be provided. This
statement is set out on page 152. The Group’s external auditor’s
report can be found on pages 154 to 165.
This Annual Report includes the Company's standalone nancial
statements on pages 241 to 262. In order to simplify the Annual
Report and help provide readers with a more succinct document,
for the year ended 31 December 2023 and beyond, these
Company standalone nancial statements will not be presented
within the Group's Annual Report.
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Significant judgements
The Committee assesses these signicant judgements to determine if they are reasonable and appropriate. The Committee has reviewed the following signicant issues throughout the year,
on which it has challenged and required management to exercise the highest level of judgement or estimation.
FOCUS AREA WHY THIS AREA IS SIGNIFICANT ROLE OF THE COMMITTEE CONCLUSION MORE INFORMATION
Revenue and margin
recognition on xed-
price EPC contracts
Due to the complexity and scale of
many of the Group’s contracts, revenue
recognition continues to be an area of
focus. The quantication and timing of
revenue and prot recognition from xed-
priced EPC contracts is a material driver
of the Group’s nancial performance and
position, which is subject to signicant
management judgement and estimation.
There is an inherent risk of bias or error
in judgements and estimates concerning,
for instance: variable consideration e.g.
variation orders, liquidated damages;
contract contingencies; and estimates to
complete cost forecasts.
The Committee reviewed and challenged the
reasonableness of evidence to support judgements
and estimates regarding revenue and prot recognition,
including non-recognition in certain instances, through
regular discussions with executive management. This
included a review of the additional assurance measures
undertaken in response to the identied control
deciencies and prior year adjustment.
The Committee focused on variable consideration;
contract contingencies; and estimates to complete
cost forecasts, particularly in light of the ongoing
deterioration in market conditions caused by the lasting
impact of the pandemic, the change in cost forecasts
on the Thai Oil Clean Fuels joint venture contract, the
mature contract portfolio, and the low order intake. The
Group’s external auditor also challenged management
on the key drivers of revenue and prot recognition on
xed-price EPC contracts and reported their ndings to
the Committee.
The Committee concluded after thorough deliberation
that the quantication and timing of revenue and prot
recognition on xed-price EPC contracts, as well as
associated reporting, was in accordance with the relevant
International Financial Reporting Standards and the
Group’s accounting policies.
Financial Review on
page 89 and note 4
to the consolidated
nancial statements
Provision
recognition or
contingent liability
disclosure of His
Majesty’s Revenue
and Custom’s
(HMRC) challenge
to the historical
application of
National Insurance
contributions to
workers in the UKCS
Several key judgements on conditions
of signicant uncertainty were required
in relation to determining whether
recognition or disclosure of this matter
was required. This included, but was not
limited to, assessing the applicability
of tax legislation cited by HMRC to
the facts of the enquiry; assessing any
developments in the enquiry during the
year; and critically evaluating advice from
independent legal and tax specialists.
The Committee evaluated management’s assessment
of developments during 2022 in conjunction with the
ongoing tribunal process. In particular, the Committee
focused on ensuring that management had critically
appraised advice provided by independent legal and
tax specialists as well as ensuring that there was an
awareness and prevention of inherent bias implicit in
management’s position.
The Committee concluded, after reviewing and challenging
management, that it remained appropriate for this matter
to continue to be disclosed as a contingent liability note in
the consolidated nancial statements.
Note 30 to the
consolidated nancial
statements
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FOCUS AREA WHY THIS AREA IS SIGNIFICANT ROLE OF THE COMMITTEE CONCLUSION MORE INFORMATION
Going concern
and viability
Management and the Board are
required to assess whether the nancial
statements should be prepared on a
going concern basis.
The Committee spent considerable time throughout
the year discussing going concern and viability. At
the end of the year a robust assessment of the going
concern assessment period to 31 December 2024
(the Assessment Period) and the subsequent viability
period was performed. This included reviewing and
challenging the Group’s forecast cash ows, liquidity
and borrowing requirements after assessing the
assumptions in respect of new order intake over the
assessment period; evaluating downside scenarios
based on the Group’s principal risks and uncertainties;
and appraising the mitigation strategies available to
management.
The Committee considered the appropriateness of the
going concern assessment and related judgements
regarding material uncertainty, reviewing the downside
scenarios and the potential mitigations as disclosed
in note 2.5 of the consolidated nancial statements
and concluded that the going concern and viability
disclosures were fair, balanced and understandable.
The Committee reviewed the Group’s going concern
assessment based on forecast cash ows, liquidity
headroom and covenant compliance over the Assessment
Period. These forecasts were based on the Board
approved business plan and modelled a range of severe
but plausible downside scenarios to reect uncertainties
inherent in forecasting future operational and nancial
performance, the committed facilities available, and
the mitigations within direct control of the Group. The
Committee also considered the risks identied and
appraised the severity and plausibility of these in setting
the downside sensitivities.
The Committee recognised that the Group's liquidity
position in the mitigated severe but plausible downside
scenario is reliant on a small number of collections from
clients and as these collections are not entirely within the
direct control of the Group, they may give rise to a material
uncertainty. The Committee reviewed the disclosures
presented in note 2.5 of the consolidated nancial
statements together with the viability statement, on pages
94 to 96 to ensure that sufcient detail was provided to
explain the basis of preparation of the nancial statements
and the Board's conclusion. The Committee concluded,
after rigorously evaluating relevant, available information,
that they remain condent in the prospects of the Group
to maintain compliance with its nancial covenants and
sufcient liquidity even in a severe but plausible downside
scenario and that the continued use of the going concern
basis of preparing the Group's nancial statements
remained appropriate. The Committee also positively
concluded on the viability of the business.
Notes 2.5 and 2.7
to the consolidated
nancial statements
Taxation The global nature of the Group’s
operations and the increasingly complex
nature of local tax rules increases
the risk of an income tax expense
misstatement. Management is required to
make several judgements and estimates
around: uncertain tax treatments given
the commercial structure of individual
contracts; and the valuation and
recoverability of any deferred tax assets.
The Group’s tax judgements and estimates were
reviewed by the Committee to ensure that the
recognition of income tax expense, uncertain tax
treatments, and any deferred tax assets were based
on reasonable and appropriate assumptions. Reports
outlining principal tax matters were reviewed and
discussed with management and the Group’s external
auditor, which also reported to the Committee on its
procedures and ndings in relation to the Group’s
tax affairs.
The Committee was satised that taxation-related
judgements and estimates were reasonable and
appropriate and that the Group’s tax affairs were being
managed, accounted and reported in accordance with
the relevant legislation, International Financial Reporting
Standards and the Group's accounting policies.
Financial Review on
page 90 and note 8
to the consolidated
nancial statements
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Whistleblowing 28%
Compliance strategy 26%
Compliance programme review 31%
Governance/Other 10%
Third Party Risk Committee 5%
Role and responsibilities of the Committee:
• To maintain direct oversight over key compliance and ethical
risks and monitor the adequacy and effectiveness of
controls in place and any mitigation activities
• To evaluate the compliance and ethical aspects of Group
culture and make recommendations to the Board on steps to
be taken to ensure a culture of integrity and honesty in the
Group’s business dealings
• To ensure that ethical policies and practices are subject to
an appropriate level of independent internal scrutiny;
overseeing the development of, and amendments to, the
Group Compliance Charter, its Code of Conduct and other
compliance policies, procedures and standards
• To support the Company in any engagement with regulatory
bodies, industry groups, advisors and other stakeholders, as
necessary and where permitted by law, regarding ethical
issues and compliance matters
• To oversee, review and approve the adequacy and security
of the Group’s whistleblowing line as a tool available for
employees and third parties to raise concerns, in
confidence, about possible wrongdoing
• To receive reports and review findings of significant internal
and external compliance-related investigations and audits
and exercise oversight, where possible, over any such
investigation impacting the Group
Dear shareholder
I am pleased to introduce my rst Committee report following my
appointment as Chair of the Committee from May 2022.
George Pierson and Andrea Abt both stepped down from the
Board at the 2022 AGM, having each served for six years. As
founder members of this Committee, I take this opportunity to
thank them both for their signicant contribution in helping to
embed our compliance and ethics programme throughout the
organisation.
David Davies and I succeeded them, joining Matthias Bichsel as
Committee members to oversee the compliance improvements
being embedded throughout the Group, to continue to provide
challenge, thereby ensuring the effectiveness of the Group’s
compliance activities.
To assist the Committee in its deliberations, the Company
Chair, other Board members, the Group General Counsel, Chief
Compliance Ofcer, the Head of Investigations, and the Head of
Audit are invited to attend all Committee meetings. In addition,
external advisors may attend all or part of any meeting, when
considered appropriate or necessary. Regular updates from
the Group Compliance function were also received, with direct
engagement with management taking place throughout the year.
The Committee is aware of the continuing need to ensure that
compliance processes are continuously developed and are
proportionate to the identied risks. This ongoing and improved
monitoring provides enhanced insight and greater assurance into
the effectiveness of the compliance programme. The Committee
acknowledges the improvements achieved to automate
compliance processes and to close out actions quicker, although
we accept that work must continue to drive the compliance
agenda forward.
As disclosed in the Audit Committee report, the Group’s Internal
Audit function identied an issue in the Thai Oil Clean Fuels
contract, which represented a deciency in internal controls.
FRANCESCA DI CARLO
Chair of the Compliance and Ethics Committee
Compliance and Ethics Committee report
How the Committee spent
its time during the year:
Membership:
Chair: Francesca Di Carlo – appointed May 2022
Committee members:
Matthias Bichsel
David Davies – appointed May 2022
Resignations during the year
Andrea Abt – resigned May 2022
George Pierson – resigned May 2022
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Whilst the Audit Committee has the delegated responsibility of
monitoring and reviewing the effectiveness of the Group’s overall
internal control systems, this Committee plays an important role,
and received interim ndings from the Group Investigations Team
on the adequacy of controls in place in this complex contract. This
matter began initially as an audit of the cost reporting process of the
E&C business, which was passed to the Group Investigations Team
for further inquiry. Details of the error identied, the outcome of the
investigation, and the review of the Group's internal controls, are set
out on page 114 and 115.
In early 2021, a gap analysis on the compliance programme was
undertaken in consultation with Freeh Sporkin & Sullivan, LLP
(FSS), the external advisors that began working with the Group in
2019. The identied actions were closely monitored and reviewed
quarterly, with the aim of providing certainty to the Committee
that the Group had a well-functioning compliance programme in
place to meet external expectations. The programme maturity was
identied by FSS as making good progress.
This gap analysis exercise was revisited at the end of 2022, to
consider potential areas which may require further attention. Each
analysis considered the control elements of different phases of the
compliance programme, evaluating the current and desired state
for each item. Where gaps were identied, the analysis set out
dened actions, assigned priorities, owners, time horizons, and the
desired end-state of each item, to ensure gaps could be narrowed
or, ideally, closed.
To this end, a communications initiative to educate the business
about the different compliance processes, and the value brought
by each in addressing the risks that the Company and employees
might face should the process not be followed thoroughly, was
rolled out during the year.
A benchmarking exercise was also conducted during the year to
ensure the Company was operating in line with peers in managing
compliance risk. Overall, the data showed that the Company’s
compliance programme was, in most areas, compliant with best
practice and operating in line with peers. One area requiring further
enhancement was training and accordingly, customised training for
high-risk employees was introduced, with systems implemented to
address any training failures.
During 2022, FSS also conducted effectiveness testing on the due
diligence programme and investigations procedures to ensure both
programmes were operating as intended and fully aligned with their
respective mandates.
FSS determined that the investigation programme was well
designed and well-functioning, with strong management support.
The ‘triage’ committee, which considers all high-risk investigations
into alleged breaches of the Company’s Code of Conduct, and
which veries the severity level assigned and decides on the
most appropriate course of action, was thought to be working
well. Following receipt of any Speak Up reports, investigation
plans were properly scoped and planned, resulting in effective
and efcient investigations and fair, accurate and timely reporting.
Progress reports on all cases were provided to the Committee,
with full granularity of each high-risk case considered in detail and
remediation plans monitored.
The external due diligence platform, provided by Dow Jones,
was also rened further to enhance the Company’s approach and
increase the emphasis on compliance evaluation and ongoing
monitoring of all third parties. During 2022, an Internal Audit review
on the operating effectiveness of the compliance due diligence was
undertaken. Enhancement opportunities were identied, and these
were implemented during the year to close out backlog issues and
to enable further enhancements to the process to
be undertaken.
A compliance culture review, last completed in 2019, was also
undertaken, with the aim of assessing both the ‘tone from the
top’ as well as the ‘tone from the middle’, with outputs compared
with the original exercise. The Committee was encouraged by the
progress made. In light of the continued improvements, Group
Compliance intends to ascertain whether ISO-37001 certication
can be obtained. This standard sets out the requirements for
the establishment, implementation, operation, maintenance, and
continual improvement of an anti-bribery management system
and provides guidance on the actions and approaches that can
be taken by companies to adhere to the requirements. ISO-37001
is intended to improve a company’s ability to prevent, detect,
and respond to bribery and comply with anti-bribery laws and
commitments.
Although continued improvements were seen throughout the
year, the Committee recognised that resourcing remained a
critical challenge for the Group Compliance function, mainly
due to challenging market conditions and a much tighter labour
market across the industry. A new Trade Compliance Manager
was appointed towards the end of the year, along with a new
Compliance Manager, who was appointed to provide support
to the contracts review process. Further appointments to the
Investigations team will be made during 2023, to enhance the skill
set within the team, while internal resources will be made available
to assist the Due Diligence team.
In light of the ongoing political situation, the Group Compliance
team extensively monitored the rapidly evolving sanctions regime
against Russia throughout the year, providing updates to the
Committee at each meeting. This involved the arrangements
related to the safe completion and handover of our Sakhalin Energy
project. The Committee has noted that since the year-end, Petrofac
has divested its control of and economic interest in the Sakhalin
Technical Training Centre, such that there are no ongoing operations
in Russia.
As required by the Committee’s terms of reference, minutes of the
meetings held by the Third Party Risk Committee (TPRC) were
reviewed during the year. A total of 80 new third parties within the
TPRC’s remit, including logistics and tax, legal and visa services,
were engaged by the Group during 2022.
Looking forward, the Committee recognises the need to continue
to reinforce the compliance message, and ensure all employees
acknowledge that how we do business is just as important as what
we do.
I am satised with the progress achieved and know that the
continued implementation of good principles and behaviours
will further embed the highest ethical standards throughout the
organisation. The Committee will work with the new Group Chief
Executive to make sure that the Company continues to progress
and further strengthen our compliance programme.
FRANCESCA DI CARLO
Chair of the Compliance and Ethics Committee
27 April 2023
Compliance and Ethics Committee report continued
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2022 remuneration arrangement 44%
Governance/Investor consultation and review
of external environment 24%
Wider workforce remuneration considerations 11%
Review of employee share plans and performance
conditions, including new share plans reviews 21%
Dear shareholder
On behalf of the Board, I am pleased to present the Directors’
remuneration report for the year ended 31 December 2022.
As a Jersey-incorporated company, Petrofac is not subject
to the remuneration reporting regulations that apply to UK–
incorporated companies. Nevertheless, the Committee recognises
the importance of effective corporate governance, and we will
therefore continue to operate in line with the UK remuneration
reporting regulations. Accordingly, we will be asking shareholders
at our 2023 AGM, to vote on the following two advisory
remuneration resolutions:
- Our Remuneration Policy (Policy), which outlines the
remuneration framework that will apply to our Executive Directors,
Non-executive Directors and the Chair of the Board
- Our Annual Report on Remuneration, which summarises the
remuneration outcomes for 2022 and explains how we intend to
apply the Policy during 2023 and beyond
2022 Group performance
The Group has faced a very difcult year with the 2022 results
disappointing, as a result of adverse commercial settlements
and further cost overruns on our legacy E&C portfolio. This was
offset by strong performance in both Asset Solutions and IES,
with several important contract extensions and breakthrough
activity in decommissioning. The Group reported lower revenue of
US$2,591 million and a full-year business performance net loss of
US$284 million. Despite these challenges, we continued to deliver
on our projects and services, whilst doing everything within our
control to protect the health and wellbeing of our people.
We have made progress on our strategy, and work is ongoing
to rebalance, reshape and rebuild Petrofac. During 2022 the
Group Executive Committee continued the drive to deliver and
enhance business performance and in this regard, it is particularly
encouraging to note the move into new geographies and the
successes in new energies, enabling us to further diversify our
portfolio of projects and services.
Directors’ remuneration report
Role and responsibilities of the Committee:
• Determine, implement and review, on behalf of the
Board, the framework and policy for the remuneration
of the Chair, the Executive Directors and other members
of the Executive team. Review the ongoing
appropriateness and relevance of the remuneration
policy
• Ensure that the objectives of the remuneration policies
and practices are transparent, support the Company’s
strategy and promote long-term sustainable success,
while addressing the principles set out in the UK Code
relating to clarity, simplicity, risk, predictability,
proportionality and alignment to culture
• Review and oversee wider workforce remuneration and
related policies and ensure that incentive schemes and
rewards drive behaviours that are consistent with our
purpose, values, and strategy, and take these into
accountwhen setting the policy for Executive Director
remuneration
• Approve the design of, and determine targets for, any
performance-related pay schemes andreview the total
annual payments made under suchschemes
• Ensure that outcomes are only earned for achieving
stretching, but fair, performance targets and that
remuneration schemes and policies enable the use
ofCommittee discretion and independent judgement
tooverride
• Maintain contact, and promote effective engagement,
withprincipal stakeholders, as required, on matters
relating to executive remuneration
MATTHIAS BICHSEL
Chair of the Remuneration Committee
Membership:
Chair: Matthias Bichsel
Committee members:
Sara Akbar, Francesca Di Carlo
Resignations during the year
Andrea Abt – resigned May 2022
How the Committee spent
its time during the year:
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Against this backdrop, the Committee remains determined to
provide a package of pay and benets that attracts, retains and
incentivises our management and staff to grow and transform
Petrofac, while also ensuring that all stakeholders, including
investors and clients, benet from a successful delivery.
The remuneration outcomes for 2022
Notwithstanding the challenging market and business
environment, the Group made steady progress against key
strategic objectives during the year that are critical to growth
and our delivery of sustainable future prots, which allowed for
a moderate total Company bonus pool of US$11 million (2021:
US$19 million). I am pleased to report that 2022 was a fatality-
free year for the Group and consequently, the Committee did
not need to exercise downward discretion to the bonus award in
this regard. Our bonus deferral scheme ensures that Executive
Directors remain focused on continued successful realisation of
value from these objectives to benet all stakeholders in the longer
term.
The Performance Share Plan (PSP) awarded in 2020 vested at
6% of the maximum. This is based on the successful performance
of one key strategic measure (cost challenge) over the period
2020-2022; the performance of all other elements, including the
TSR measure, was lower than threshold and therefore did not
result in any vesting. Further details are set out on page 140. The
Committee considered that this 6% vesting for our long-term
incentive plan was commensurate with Petrofac’s nancial results
over that period and was satised that no discretionary adjustment
was necessary.
Restatement of 2021 financial results
Following the nancial restatement in relation to the 2021 nancial
year, and in line with our Remuneration policy, the bonuses
awarded to the Executive Directors for that year have been
recalculated to reect the restated gures, specically the lower
Group Net Prot outcome. This results in a reduction of £106,621
for the former Group Chief Executive and £19,189 for the Chief
Financial Ofcer, which will be claimed back. Further details can
be found on page 138.
Executive Director changes
It was announced in November 2022 that Sami Iskander would
step down from the Board at the end of March 2023. On his
departure, Mr Iskander received the balance of his 12 months’
notice pay. The details of Mr Iskander’s remuneration can
be found on page 149. He will remain subject to the post-
employment shareholding guidelines and will retain all vested
shares for a period of two years following his departure.
Tareq Kawash was appointed Group Chief Executive with effect
from 1 April 2023 on similar terms to Mr Iskander. Details of
Mr Kawash’s package can be found on page 148.
Our Chief Financial Officer will receive a 5% increase in salary
effective April 2023. This is less than the average increase
of Petrofac’s UK salaries of 6.8%. He will receive a bonus of
£200,000 (25% of maximum) and a PSP award at 200% of salary
(capped at three times face value at award date). Details of his
remuneration can be found on pages 148 and 149.
Remuneration policy
In accordance with best practice, the Company's remuneration
policy will be submitted to shareholders at the 2023 AGM. No
signicant changes are being proposed to the policy that was
previously approved by shareholders at the AGM held in 2020.
Details of the Remuneration policy can be found on pages 129 to
137.
Changes to be made in 2023
There are no proposed changes to the annual bonus framework
in 2023 and the PSP framework will continue to be delivered
via a mechanism based on 50% TSR performance and 50% on
performance against strategic objectives. Further details can be
found on pages 149 and 150.
Pay outcomes for the Chair and
Non-executive Directors
The Chair and Non-executive Director fees have not been
increased since 2018 and we propose keeping these under review
during 2023 to consider the complexity and time commitments
required of our Directors in supporting the business and the
necessary turnaround activities. It is critical to ensure that our fees
enable us to attract and retain directors of sufcient calibre to lead
the Group through the challenging years ahead.
Conclusion
Over the last few years, the Committee has had to respond
quickly and decisively to the challenges faced. We have had to
make some difficult decisions, but at all times, we have sought to
act in the best interests of Petrofac and all our stakeholders.
I hope you find the report clear and informative, and that the
Committee has your support for the Remuneration Policy and
Annual Report on Remuneration at the forthcoming AGM.
MATTHIAS BICHSEL
Chair of the Remuneration Committee
27 April 2023
Directors’ remuneration report continued
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Remuneration at a glance
SALARY BENEFITS CASH ALLOWANCE IN LIEU OF
PENSION AND OTHER BENEFITS
ANNUAL BONUS PERFORMANCE SHARE PLAN SHAREHOLDING GUIDELINES
Purpose and link
to strategy
Core element of
remuneration, paid for doing
the expected day-to-day job.
To be market competitive
and to attract and retain the
appropriate talent to deliver
Petrofac’s strategy.
Provide employees with
market competitive benefits.
Supports the attraction and
retention of appropriate
talent.
Provide employees with an
allowance for benefits and
retirement planning.
Supports the attraction and
retention of appropriate
talent.
Incentivise delivery of the
business plan on an annual
basis. Rewards performance
against key performance
indicators which are critical
tothe delivery of our
businessstrategy.
Incentivise Executive
Directors’ performance over
the longer term. Rewards the
delivery of targets linked to
the long-term strategy of the
business, and the creation of
shareholder value over the
longer term.
Aligns Executive Directors
with shareholders’ interests.
Key features Normally reviewed at the
beginning of each year, with
any change usually being
effective from 1 April.
Provision of benefits linked
to local market practice.
UK-based Executive
Directors receive benefits
that may include, but are not
limited to, private health
insurance for the Executive
Director and their family and
other appropriate life and
income protection insurance
arrangements.
Provision of a cash
allowance in place of
benefits including, but not
limited to, pension
contributions and car
allowances. The cash
allowance in lieu of pension
forUK Executive Directors is
at a value aligned with the
employer’s pension
contribution for our wider
UKworkforce.
The maximum annual bonus
opportunity is 200% of
salary. Financial element
(60%) and Strategic element
(40%). Awards are based on
performance in the relevant
financial year. Performance
measures are set annually
and pay-out levels are
determined by the
Committee based on
performance against those
targets. Executive Directors’
bonus will be delivered with
an equal split between cash
and deferred shares through
the Deferred Bonus Plan,
which will vest in equal
tranches over one, two and
three years from award. The
Committee has full discretion
to adjust bonus outcomes
under the annual bonus plan
up or down. Malusand
clawback provisions apply.
Annual award of
performance shares up to
200% of basic salary or in
exceptional circumstance, up
to 300% ofbasic salary.
Vesting of awards is
dependent on achievement
of stretching performance
targets measured over a
period of three years. Any
vesting post-tax shares will
be subject to an additional
two-year holding period. For
the TSR element, ‘threshold’
levels of performance result
in 25% ofthe award vesting,
increasing to 100% of the
award for maximum
performance. Malusand
clawback provisions apply.
The CEO is expected to build
up a shareholding of 300%
of base salary, with other
Executive Directors expected
to build up a shareholding of
200% of base salary. Until
the relevant shareholding
guidelines have been met,
Executive Directors are
required to hold any vested
post-tax PSP/DBP shares.
Updated post-cessation
shareholding guidelines
included in the 2022 policy
report require Executive
Directors to maintain 100%
of their within-employment
shareholding guideline (or
their actual holding if lower)
for two years following
departure. Previously,
Executive Directors were
required to maintain 100% of
the guideline for the first year
following departure, and
50% of the guideline for the
second year.
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SALARY BENEFITS CASH ALLOWANCE IN LIEU OF
PENSION AND OTHER BENEFITS
ANNUAL BONUS PERFORMANCE SHARE PLAN SHAREHOLDING GUIDELINES
Planned for
year ending
31 December
2023
5% salary increase for CFO to
£420,000 per annum with
effect from 1 April 2023, lower
than the wider UK workforce.
CEO appointed 1 April 2023
and awarded salary of
£675,000 per annum.
Medical insurance received. In
addition, CEO to receive a car
allowance of £20,000 and an
additional allowance of
£40,000 for schooling.
Cash allowances unchanged
from prior year. Pension
contribution of 6.2% of salary
for both CEO and CFO.
The maximum annual bonus
opportunity for 2023 will be
unchanged at 200% of salary.
The Committee will set
stretching 2023 targets and
will provide disclosure at the
end of the performance year.
Performance measures on TSR
element (50% of award) and
strategic element (50% of
award). The maximum
performance share plan
opportunity will be unchanged
from prior year at 200% of
salary. Maximum value that can
be delivered in year of vesting
limited to three times face value
of award at grant. The CEO will
receive an award of 300% of
salary award in 2023.
Employment shareholding
guidelines remain unchanged
for 2023. Updated post-
cessation shareholding
guidelines included in the 2022
policy report require Executive
Directors to maintain 100% of
their within-employment
shareholding guideline (or their
actual holding if lower) for two
years following departure.
Implementation
in year ended
31 December
2022
3.5% salary increase for
former CEO to £672,750 per
annum with effect from 1 April
2022. This increase was at the
lower end of the average salary
increase of the UK workforce
between 3.5% and 6%. CFO
salary increased to £400,000
per annum with effect from
1 April 2022, following his
appointment to the new role in
September 2021.
Benefits unchanged from prior
year. Medical insurance of
£1,159 per annum received,
increased by 0.2% on 2021
figures due to premium
increases. CEO received a car
allowance of £20,000.
Cash allowances unchanged
from prior year. Pension
contribution 7% of salary for
CEO and 6.2% of salary for
CFO.
Pay-out of 0% of maximum for
the financial element of the
plan and 75% of the maximum
for the strategic element of the
plan for the CEO. Pay-out of
0% of maximum for the
financial element of the plan
and 62.5% of the maximum for
the strategic element of the
plan for the CFO. Total pay-out
of 30% of maximum for the
CEO and 25% of the maximum
for the CFO.
Vesting of 2020 performance
share plan at 6% of maximum.
The CEO shareholding is 15%
of the shareholder guideline.
He was appointed on 1
January 2021 and was yet to
fulfil this target prior to his
departure from the Company
on 31 March 2023. The CFO
shareholding is 4% of the
shareholder guideline. He was
appointed on 1 September
2021 and is yet to fulfil this
target.
Implementation
in year ended
31 December
2021
CEO appointed 1 January
2021 and awarded salary of
£650,000 per annum. CFO
appointed 1 September 2021
and awarded salary of
£350,000 per annum.
Benets received upon
appointment. CEO received
medical insurance of £1,115
per annum and car allowance
of £20,000.
Cash allowances upon
appointment. Pension
contribution 7% of salary for
CEO and 6.2% of salary for
CFO.
For CEO, pay-out of 35.1% of
maximum for the nancial
element of the plan and 75% of
the maximum for the strategic
element of the plan. For CFO,
pay-out of 35.1% of maximum
for the nancial element of the
plan and 100% of the
maximum for the strategic
element of the plan. Downward
discretion exercised to reduce
the bonus award by 5%. Total
pay-out of 50.0% of maximum
for the CEO and 61.0% of the
maximum for the CFO, prior to
the restatement of nancial
results and the reduction in the
awarded bonus.
Vesting of 2019 performance
share plan at 6% of maximum.
CEO shareholding 13% of the
shareholder guideline.
Appointed 1 January 2021 and
is yet to full this shareholder
guideline. CFO shareholding
6% of the shareholder
guideline. Appointed 1
September 2021 and is yet to
full this shareholder guideline.
Directors’ remuneration report continued
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Policy report
Looking forward
The following section sets out our Directors’ Remuneration Policy (the ‘Policy’). This Policy will be submitted as an advisory vote to shareholders at the 2023 AGM and will apply to payments made on or after
June 2023.
As a Jersey-incorporated company, Petrofac does not have the benet of the statutory protections afforded by the UK Companies Act 2006 in relation to the remuneration reporting regime. Accordingly, if
there is any inconsistency between the Company’s Policy (as approved by shareholders) and any contractual entitlement or other right of a Director, the Company may be obliged to honour that contractual
entitlement or right. Formal legal advice afrms that it would be impractical for us to submit our new Policy for a binding shareholder vote in the manner of a UK-incorporated company. Hence our decision,
once again, to submit the Policy to an advisory vote at the 2023 AGM. In considering the Remuneration Policy, the Committee followed a robust process, which included discussions on the content of the
Policy with consideration and input from management and our independent advisors. The Committee also sought the views of the Company’s major shareholders.
Changes to the Policy
There are no signicant changes between the Policy presented for approval here and that approved by shareholders at the 2020 AGM.
Executive Directors – Fixed remuneration
ELEMENT/PURPOSE
AND LINK TO STRATEGY OPERATION MAXIMUM OPPORTUNITY
PERFORMANCE
MEASURES
Salary
Core element of
remuneration, used to
attract and retain
Executive Directors of
the calibre required to
develop and deliver our
business strategy
The Committee takes into account a number of factors when setting salaries,
including (but not limited to):
• Size and scope of the individual’s responsibilities
• The individual’s skills, experience and performance
• Typical salary levels for comparable roles within appropriate pay comparators
• Pay and conditions elsewhere in the Group
Basic salaries are normally reviewed at the beginning of each year, with any
change usually being effective from 1 April.
Whilst there is no maximum salary level, any increases will typically not exceed
the range of increases awarded to our wider employee population within the
relevant geographic area.
Higher increases may be made under certain circumstances, at the Committee’s
discretion. For example, this may include:
• Increase in the scope and/or responsibility of the individual’s role on either a
permanent or temporary basis
• Development of the individual within the role
In addition, where an Executive Director has been appointed to the Board at a
lower than typical salary, larger increases may be awarded to move them closer
to market practice as their experience develops.
None
Cash allowance in
lieu of pension and
other benefits
Provide employees
withan allowance
forbenefits and
retirement planning
Executive Directors will receive a cash allowance in lieu of pension contributions
and will normally receive an additional cash allowance in respectof car
allowance and other benefits.
While there is no maximum level of cash allowance, its value will normally be
aligned with the employer’s pension contribution for our wider workforce in the
relevant region.
In determining whether the level of cash allowance remains appropriate, the
Committee will typically have regard to the rate of increase in the cost of living in
the local market and other appropriate indicators.
None
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Directors’ remuneration report continued
ELEMENT/PURPOSE
AND LINK TO STRATEGY OPERATION MAXIMUM OPPORTUNITY
PERFORMANCE
MEASURES
Benefits
Provide employees
withmarket competitive
benefits
UK-based Executive Directors receive benefits that may include (but are not
limited to) private health insurance for the Executive Director and their family and
other appropriate life and income protection insurance arrangements.
Non-UK-based Executive Directors receive similar benefits to UK-resident
Executive Directors. In addition, they may receive other benefits aligned with
local market practice in the applicable location, which may include (but are not
limited to) children’s education, return flights to their permanent home, tax
equalisation, and appropriate insurance arrangements.
Where Executive Directors are required to relocate, the Committee may offer
additional expatriate benefits, if considered appropriate.
Expenses incurred in the performance of duties for the Company may be
reimbursed or paid for directly by the Company, as appropriate, including any
tax due on such payments.
UK-based Executive Directors are eligible to participate in any all-employee
share plans operated by the Company on the same basis as other eligible
employees. Petrofac currently operates a Share Incentive Plan in the UK
1
.
While no maximum level of benefits is prescribed, they are set at an appropriate
market competitive level, taking into account a number of factors, which may
include:
• The jurisdiction in which the individual is based
• The level of benefits provided for other employees within the Group
• Market practice for comparable roles within appropriate pay comparators
The Committee keeps the benefit policy and benefit levels under regular review.
Where Executive Directors participate in all-employee share plans, their
maximum opportunity will be as prescribed in the plan at that time.
None
Pension
Provide appropriate
retirement benefits
(were Executive
Directors to participate)
The Company operates defined contribution pension arrangements across
theGroup.
In line with legal requirements, the Company offers participation in the UK
pension plan to its UK-based Executive Directors.
While both current UK-based Executive Directors have opted to receive a cash
allowance in lieu of pension provision, this position is kept under review.
If the current Executive Directors were to join the Group pension arrangements,
the level of Company contribution would be aligned with that of the wider
UKworkforce.
Any newly appointed Executive Director joining the Group pension arrangements
would receive a Company contribution rate in line with that forthe wider
employee population within their local market.
None
1 The Committee may, in the event of any variation of the Company’s share capital, demerger, delisting, or other event which may affect the value of awards, adjust or amend the terms of awards in accordance with the rules of the relevant share plan.
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Executive Directors – Variable remuneration
ELEMENT/PURPOSE
AND LINK TO STRATEGY OPERATION MAXIMUM OPPORTUNITY PERFORMANCE MEASURES
Annual bonus
Incentivise delivery of
the business plan on
an annual basis
Rewards performance
against key
performance indicators
which are critical to the
delivery of our business
strategy
Awards are based on performance in the relevant financial year.
Performance measures are typically set annually and pay-out levels
are determined by the Committee based on performance against those
targets.
Typically, half of the bonus is paid in cash and half is deferred into
shares under the Deferred Bonus Plan, which vest in equal tranches
over one, two and three years from award.
The Committee has full discretion to adjust bonus outcomes under the
annual bonus plan up or down where:
• They do not reflect the underlying financial or non-financial
performance of the participant or the Group over the relevantperiod
• Are not appropriate in the context of circumstances that were
unexpected or unforeseen at the award date
• There exists any other reason why an adjustment is appropriate.
Malus and clawback provisions apply (see notes to the table).
Maximum bonus
opportunity of 200%
ofbasic salary.
Targets are set by the Committee each year, taking into account a number of
internal and external reference points, including the Company’s key strategic
objectives for the year.
The Committee ensures that targets are appropriately stretching in the context
of the business plan and that there is an appropriate balance between
incentivising Executive Directors to meet financial targets for the year and to
deliver specific non-financial, strategic, operational and personal goals. This
balance allows the Committee to effectively reward performance against the
key elements of our strategy.
Measures used typically include (but are not limited to):
• Financial measures
• HSE, compliance, ESG and employee-related measures
• Strategic objectives and reaching milestones towards longer-term strategy,
Group function and business goals
The weighting of the above measures will be determined by the Committee each
year to reect the strategic objectives for the relevant year. However, normally, at
least 60% of the bonus will be based on nancial measures, with the remainder
ordinarily allocated to dened annual strategic objectives.
Typically, 30% of the maximum opportunity is paid for ‘threshold’ performance
(i.e. the minimum level of performance which results inapayment) and 50% for
‘on-target’ performance.
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C_GEN Section
Performance
Share Plan
1
Incentivise Executive
performance over the
longer term
Rewards the delivery
of targets linked to the
long-term strategy of
thebusiness, and the
creation of shareholder
value over the longer
term
Awards are normally made in the form of conditional share awards, but
may be awarded in other forms if appropriate, including as nil
costoptions.
Awards may also be satisfied in cash in those jurisdictions where there
are restrictions on providing shares.
Vesting of awards is dependent on achievement of stretching
performance targets measured over a period of at least three years.
The Committee has full discretion to adjust outcomes under the PSP
up or down where:
• They do not reflect the underlying financial or non-financial
performance of the participant or the Group over the relevant period
• They are not appropriate in the context of circumstances that were
unexpected or unforeseen at the award date
• There exists any other reason why an adjustment is appropriate
Additional shares are accrued in lieu of dividends and paid on any
shares which vest.
Any vested post-tax shares will be subject to an additional two-year
holding period. Malus and clawback provisions apply (see notes to the
table). The Committee may adjust or amend the terms of the awards in
accordance with the PSP rules.
The maximum award that
can be granted in respect
of a financial year of the
Company under the PSP
is 200% of basic salary
(or in circumstances
which the Committee
deems to be exceptional,
awards up to 300% of
base salary can be
granted).
Awards vest based on performance against stretching performance targets.
The ultimate goal of the Company’s strategy is to provide long-term
sustainable returns to shareholders. The Committee strives to do this by
aligning the performance measures under the PSP with the long-term strategy
of the Company and considers that strong performance under the chosen
measures should result in sustainable value creation. Measures used typically
include (but are not limited to):
• Shareholder return measures – a measure of the ultimate delivery of
shareholder returns. This promotes alignment between Executive Director
reward and the shareholder experience
• Strategic measures – aligned with the Company’s long-term strategy
• Financial measures – to reflect the financial performance of our business
and a direct and focused measure of Company success
The weighting of each measure will be determined by the Committee each year
to reflect the strategic objectives over the relevant performance period.
For ‘threshold’ levels of performance, 25% of the award vests, increasing to
100% of the award for maximum performance.
The Committee may amend the performance conditions applicable to an
award if events occur which cause the Committee to consider that it fails to
fulfil its original purpose and would not be materially less difficult to secure.
Shareholding
guidelines
Aligns Executive
Directors with
shareholders
The CEO is expected to build up a shareholding of 300% of base
salary, with other Executive Directors expected to build up a
shareholding of 200% of base salary.
Until the relevant shareholding guidelines have been met, Executive
Directors are required to hold any vested post-tax PSP/DBP shares.
None None
Post-cessation
shareholding
guidelines
Provides continued
alignment with
shareholders post
departure from
theCompany
Executive Directors will normally be required to maintain their full
within-employment shareholding guideline (or their actual
holdingiflower) for two years following departure. There is a
mechanism in place to enforce these post-employment guidelines.
None None
1 The Committee may, in the event of any variation of the Company’s share capital, demerger, delisting, or other event which may affect the value of awards, adjust or amend the terms of awards in accordance with the rules of the relevant share plan.
Directors’ remuneration report continued
ELEMENT/PURPOSE
ANDLINKTO STRATEGY OPERATION MAXIMUM OPPORTUNITY PERFORMANCE MEASURES
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Non-executive Directors
ELEMENT/PURPOSE AND
LINK TO STRATEGY
OPERATION
MAXIMUM OPPORTUNITY
PERFORMANCE MEASURES
Non-executive
Director fees
Core element of
remuneration, paid
for fulfilling the
relevant role
Non-executive Directors receive a basic annual fee and receive additional
fees in respect of other Board duties such as chairmanship of Board
Committees and acting as the Senior Independent Director.
The Board as a whole is responsible for determining Non-executive Director
fees. These fees are the sole element of Non-executive Director
remuneration. Non-executive Directors are not eligible for annual bonus,
share incentives, pensions or other benefits.
The Chair receives an all-inclusive fee for the role, which is set by the
Remuneration Committee.
Fees are typically reviewed annually. Expenses incurred in the performance
of duties for the Company may be reimbursed or paid for directly by the
Company, as appropriate, including any tax due on the payments.
A total of £20,000 of the Chair’s quarterly fee and £5,000 of each Non-
executive Director’s quarterly fee is used to purchase Petrofac Limited
shares.
Fees are set at a level which is considered
appropriate to attract and retain the calibre of
individual required by the Company.
None
Notes to the policy tables
Malus and clawback provisions
In specic circumstances, the Committee may:
• Require repayment of amounts received under the annual bonus at any time up to the second
anniversary of the payment date
• Reduce or cancel unvested PSP awards or require repayment of amounts already paid out at any
time up to the second anniversary of the vesting date
Circumstances in which malus and/or clawback may be considered include, for example:
• Material misstatement of financial results
• Material failure of risk management
• Material breach of any relevant health and safety or environment regulations
• Serious reputational damage to the Company (or any Group member)
• Code of Conduct breach
Legacy matters
The Committee can make remuneration payments and payments for loss of ofce outside of the Policy
set out above where the terms of the payment were agreed (i) before the Policy set out in this report
came into effect, provided the terms of the payment were consistent with any applicable policy in force at
the time they were agreed; or (ii) at a time when the relevant individual was not a Director of the Company
(or other person to whom the Policy set out above applies) and that, in the opinion of the Committee,
the payment was not in consideration for the individual becoming a Director of the Company (or such
other person). This includes the exercise of any discretion available to the Committee in connection with
such payments. For these purposes, payments include the Committee satisfying awards of variable
remuneration and, in relation to an award over shares, the terms of the payment are agreed at the time
the award is granted.
The Policy set out above applies equally to any individual who would be required to be treated as
a director under the applicable regulations. The Committee can make remuneration payments and
payments for loss of ofce outside of the Policy set out above if such payments are required by law in
a relevant country.
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C_GEN Section
Directors’ remuneration report continued
Performance measures and targets
The performance measures used under the annual bonus and long-term incentives are intended to
drive performance against key nancial and non-nancial business objectives, ultimately leading to
value creation for shareholders. Targets are set to be appropriately stretching in the context of internal
and external performance expectations.
Remuneration arrangements throughout the Group
The remuneration policy for our Executive Directors is designed in line with the remuneration
philosophy and principles that underpin remuneration for the wider Group.
The objective of the remuneration policy is to provide a compensation package that reects the size,
complexity and scope of the Company’s business, promotes long-term success and supports our
strategic objectives. It does this through a balance of xed and variable pay, with the intent of creating
a competitive total remuneration package that attracts and retains executives while creating an
appropriate alignment between incentivising executive performance and the interests ofshareholders.
To this end, base salaries are generally referenced against the median of a relevant benchmarking
group. Variable elements, both short and long-term, are structured so that individuals can achieve
upper quartile total remuneration, subject to achievement of challenging performance targets that are
transparent, stretching and rigorously applied.
All our reward arrangements are built around the common objectives and principles outlined below:
• Performance driven – the Company intentionally places significant focus on variable
remuneration, ensuring that a meaningful proportion of remuneration is based on performance.
Performance targets are typically aligned with those of the Executive Directors. As a result,
individuals are incentivised towards consistent financial and non-financial business goals and
objectives, in addition to appropriate individual goals.
• Employees as shareholders – a substantial number of employees participate in our various share
incentive plans. Asa result of this participation, as well as those shares owned and purchased by
employees prior to and since IPO, Petrofac is proud of the significant levels of employee share
ownership within the Company. We consider that this is one of the key drivers of performance
throughout the business.
UK Corporate Governance Code
The Committee has been mindful of the UK Corporate Governance Code's six principles in
determining remuneration policy. The Committee's view is that the framework is well-aligned with
these areas:
• Clarity and simplicity – our remuneration framework has been established to support both the
financial and strategic priorities of the Company, aligning with shareholder interests. The changes
made to the pension allowance and long-term incentives, to align to the wider workforce and
focus on key strategic objectives, were designed to improve both simplicity and transparency. We
have a simple pay structure, comprised of fixed pay elements, short-term and long-term variable
pay. These elements provide a clear line of sight for both executives and shareholders with the
variable pay elements providing stretching targets to drive the success of the business.
• Risk – our reward structure is aligned to the risk management structure, with all executive
variable pay awarded on a discretionary basis and subject to malus and clawback provisions. Our
corporate governance structure provides for a joined-up view between emerging and crystallised
risks and remuneration outcomes.
• Predictability – the Policy sets out the maximum opportunity for each component of executive
remuneration to provide transparency around overall opportunities.
• Proportionality – there is alignment between the performance of the Company and the rewards
available to Executive Directors. All executive performance measures are disclosed where
awards are made, providing the link between the performance achieved and the shareholder
value created. This transparency, alongside the independent approach taken on executive
remuneration decisions, supports proportionate remuneration decisions, set against Company
and individual performance.
• Alignment to culture – the balance of financial and non-financial measures for both short-term
and long-term incentives is designed to support the values and behaviours for long-term
sustainable growth.
Consideration of shareholder views
The Company places signicant emphasis on our strong relationship with shareholders, and
recognises the importance of clear and full consultation on all aspects of remuneration and
governance. In reviewing our approach to directors’ remuneration reporting this year and our
forward-looking remuneration policy, we maintained a dialogue with our major shareholders
and took their views into account. The Committee continues to monitor shareholder views
when evaluating and setting the remuneration strategy, and we commit to consulting with major
shareholders prior to any significant changes to our remuneration policy.
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C_GEN Section
Recruitment policy
In determining remuneration arrangements for new Executive Directors, the overall structure of the
package would normally be aligned with that set out in the policy table above:
• Salary positioning would reflect the skills and experience of the individual and may be set at a
level to allow future progression to reflect performance in the role
• The Committee may provide additional benefits to expatriate appointments, as and where
appropriate
• Maximum variable pay (excluding buy-outs) will be in line with the usual aggregate maximum set
out in the policy table of 500% of salary
• Subject to the 500% limit, the Committee retains the discretion in the first year following
appointment to flex the balance between annual and long-term incentive and the measures used
to assess performance for these elements
The Committee may award compensation for the forfeiture of remuneration arrangements from a
previous employer. In doing so, the Committee would aim to structure any replacement awards in a
like-for-like manner to the extent possible, taking into account relevant factors, including:
• The form of the forfeited awards (e.g. cash or shares)
• Any performance conditions attached to them and the likelihood of these conditions being
satisfied
• The proportion of the vesting and/or performance periodremaining
The Committee will continue to have regard to the best interests of both Petrofac and its shareholders
and is conscious of the need to pay no more than is necessary, particularly when determining buy-out
arrangements.
In making buy-out awards to new appointments, the Committee may grant awards under the relevant
provision in the FCA Listing Rules, which allows for the granting of awards specically to facilitate, in
unusual circumstances, the recruitment of an Executive Director, without seeking prior shareholder
approval. Indoing so, it will comply with the provisions in force at the date ofthis report.
The overall approach outlined above would also apply to internal appointments, with the proviso that
any commitments entered into before promotion that are inconsistent with the Policy will continue
to be honoured. In the event of the appointment of a new Non-executive Director, remuneration
arrangements will normally be in line with those detailed in the table on page 133.
Executive Director service contracts
The key employment terms and other conditions of the current Executive Directors, as stipulated in their
service contracts are set out below:
PROVISION POLICY
Notice period
12 months’ notice by either the Company or the Executive Director (no fixed expiry
date).
Termination
The Company may terminate employment by making a payment in lieu of notice
equivalent to the value of base salary and benefits in respect of the notice period.
The Company would normally expect Executive Directors to mitigate any loss
upon their departure.
Non-executive Director letters of appointment
The Non-executive Directors, including the Chair of the Company, have letters of appointment which
set out their duties and responsibilities. They do not have service contracts. The key terms of the
appointments are set out in the table below:
PROVISION POLICY
Period
Three months’ notice by either the Company or the Non-executive Director.
Termination
Non-executive Directors and the Chair are not entitled to compensation on leaving
the Board. If a Non-executive Director or the Chair is requested to resign, they are
entitled to prior notice or fees in lieu of three months’ notice.
In line with the UK Code, all Directors will seek annual reappointment by shareholders at the AGM.
Service contracts and letters of appointment for all Directors are available for inspection by any
person at our registered ofce in Jersey and at our corporate services ofce in London. They will also
be available for inspection during the 30 minutes prior to the start of our AGM to be held in London
on 23 June 2023.
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C_GEN Section
Policy on payment for loss of office
The Committee takes a number of factors into account when determining leaving arrangements for
an Executive Director, including the nature and circumstances of the intended departure:
• The Committee must satisfy any contractual obligations agreed with the Executive Director. As a
non-UK-incorporated company, without the benefit of the statutory protections afforded by the
UK Companies Act 2006, the Company would be obliged to honour any contractual entitlement
or other right of an Executive Director, even if it were inconsistent with the Policy
• Individuals may be eligible to receive an annual bonus on a time pro-rated basis, subject to
business and individual performance in the same manner as for continuing Executive Directors
and paid at theusual time
• Other payments such as legal fees and outplacement fees may be paid if it is considered
appropriate
The treatment of outstanding share awards is governed by the relevant share plan rules. The following
tables provide a summary of the leaver provisions of each of our existing share plans:
PLAN
PERFORMANCE
SHARE PLAN
RESTRICTED
SHARE PLAN
DEFERRED
BONUS PLAN
SHARE
INCENTIVE PLAN
Summary
of plan
Long-term
incentive plan
for Executive
Directors
andsenior
management
Below
Board only
1
Deferred
bonus plan
for Executive
Directors and
senior
management
HMRC-
approved, tax
efficient plan
available for
participation
to all
UK-based
employees
Good leaver categories
Death
Injury, ill-health or disability
Transfer of employing company
or business outside Group
Retirement by agreement
withemployer
Redundancy
Any other scenario in which the
Committee determines good
leaver treatment is justified
Directors’ remuneration report continued
Treatment for good leavers under normal circumstances
As governed by the share plan rules and in accordance with the Company’s share dealing code
2
:
PLAN PERFORMANCE SHARE PLAN
RESTRICTED
SHARE PLAN
DEFERRED
BONUS PLAN SHARE INCENTIVE PLAN
Vesting of
award(s)
On a time apportioned
basis, subject to the
achievement of
performance conditions
tested at the relevant
vesting date, unless in
either case the Committee
determines it fair and
reasonable that a greater
proportion should vest
On a time
apportioned
basis
3
Vest in full Leaver provisions
under the SIP are in
accordance with
the standard HMRC
leaver provisions
Vesting
date
The original vesting date
4
The date of
cessation
5
The original
vesting date
4
Death
All unvested awards
shall vest in full on the
date of death
All unvested
awards shall
vest in full on
thedate of death
All unvested
awards shall
vest in full on
thedate of death
All shares will be
released on the
date of death
Treatment for bad leavers (i.e. any other leaving reasons than those provided above)
6
PLAN PERFORMANCE SHARE PLAN
RESTRICTED
SHARE PLAN
DEFERRED
BONUS PLAN SHARE INCENTIVE PLAN
Bad leaver
Unvested awards
lapse in full
3
Unvested awards
lapse in full
3
Unvested awards
lapse in full
All shares are
released in
accordance with the
standard HMRC
leaver provisions
1 Executive Directors may hold awards which were granted prior to their appointment to the Board.
2 Other than the SIP, individuals leaving as ‘good leavers’ will be deemed to cease employment when the relevant notice period ends
unless the Committee determines that cessation be on an earlier date on or following the date notice was given.
3 Unless determined otherwise by the Committee.
4 The Committee has the flexibility to determine that awards can vest upon cessation of employment.
5 Awards are generally not subject to performance conditions and will vest on cessation of employment, subject to the terms of the RSP.
6 Other than the SIP, individuals leaving as ‘bad leavers’ will be deemed to cease employment when notice is given, unless the Committee
determines to deem cessation to be on a later date, no later than the end of the relevant notice period.
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Holding periods and other events
If an Executive Director leaves the Company holding vested PSP awards which are still subject to a
mandatory holding period, the holding period will continue to apply, unless determined otherwise by
theCommittee.
On a change of control or winding up of the Company, PSP awards will vest on a time pro-rated
basis, and where applicable be subject to the achievement of the relevant performance conditions,
unless the Committee determines that the circumstances are sufciently exceptional to justify a higher
level of vesting.
Illustration of the Remuneration Policy
Petrofac’s remuneration arrangements have been designed to ensure that a signicant proportion
of pay is dependent on the delivery of stretching short and long-term performance targets, that
are aligned with the creation of sustainable shareholder value. The Committee considers the level
of remuneration that may be received under different performance outcomes to ensure that this is
appropriate in the context of the performance delivered and the value added for shareholders.
The chart below provides illustrative values of the remuneration package in 2023 for Executive
Directors under four assumed performance scenarios:
ASSUMED PERFORMANCE ASSUMPTIONS USED
Fixed pay
All performance scenarios • Consists of total fixed pay, including base salary
and cash allowance (as at 1 January 2023) and
benefits
Variable pay
Minimum performance • No pay-out under the annual bonus scheme
• No vesting under the PSP
Performance in line with
expectations
• 50% of the maximum pay-out under the annual
bonus scheme (i.e. 100% of salary)
• 50% vesting under the PSP (i.e. 100% of salary)
Maximum performance
1
(including 50% share price
growth scenario)
• 100% of the maximum pay-out under the annual
bonus scheme (i.e. 200% of salary)
• 100% vesting under the PSP (i.e. 200% of salary)
1 Showing maximum PSP award opportunity of 200% of base salary, in line with the usual maximum award under the plan rules. Awards
of up to 300% of base salary may be made in exceptional circumstances.
These charts provide illustrative values of the remuneration package in 2023. PSP awards have
been shown at face value with no discount rate assumptions. Amounts have been translated to US
dollars based on the average exchange rate for 2022 of £1 : US$1.243135. Actual outcomes may
differ from those shown:
US%2,610,583
20% 20%
17% 17%
34% 34%
100% 100%
40% 40%
33% 33%
33% 33%
40% 40%
50% 50%
33% 33%
Maximum Maximum
Maximum plus 50% share price growth Maximum plus 50% share price growth
On-target On-target
Below threshold Below threshold
US$1,566,351
US$522,117
Base Pay Bonus Performance PSP Performance Total Maximum Pay
1 Annual salary £675,000 from start date of 16 March 2023. Variable pay reflective of 200% under the regular policy opportunity.
However, in accordance with policy, Tareq Kawash was awarded an exceptional 300% of salary on appointment.
Group Chief Executive – Tareq Kawash
1
Chief Financial Officer – Afonso Reis e Sousa
US$839,116
US$2,517,348
US$ 4,195,580
US$5,034,696 U S $3,132,70 0
Consideration of conditions elsewhere in the Company
When determining remuneration arrangements for Executive Directors, the Committee considers as
a matter of course, the pay and conditions of employees throughout the Group. In particular, the
Committee pays specific attention to the general level of salary increases and the size of the annual
bonus pool within the wider population, with particular reference to the year-on-year change in
these figures.
While the Committee does not directly consult with our employees as part of the process of
determining executive pay, the Committee does receive feedback from employee surveys and takes
this into account when reviewing executive pay. In addition, a significant number of our employees are
shareholders and so are able to express their views in the same way as other shareholders.
Members of the Committee are invited to meet with the Petrofac Workforce Forum at least twice per
year. This is an elected forum constituted of 12 representatives from the global workforce which
represents wider employee interests and raises issues to the Board for discussion and resolution.
Questions raised can involve remuneration issues, some of which are then taken forward for debate
at scheduled Committee meetings.
Minor amendments
The Committee may make minor amendments to the policy set out above (for regulatory, exchange
control, tax or administrative purposes or to take account of a change in legislation) without
obtaining shareholder approval for that amendment.
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C_GEN Section
Annual Report on Remuneration
Looking backwards
The information presented from this section, until the relevant note on page 144, represents the audited section of this report.
Single total figure of remuneration
The following table sets out the total remuneration for Executive Directors for the year ended 31 December 2022, with prior year gures also shown.
Base salary Taxable benefits
Cash in lieu of pension
and other benefits Annual bonus Long-term incentives
Restatement
adjustment to bonus Total remuneration Total fixed pay Total variable pay
(a) (b) (c) (d) (e) (f) (g)
US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
Executive Directors
1
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
Sami Iskander
3
829 894 26 29 58 63 502 807 0 0 0 (147) 1,415 1,646 913 986 502 660
Afonso Reis e Sousa
2, 3
480 158 1 0 30 10 249 176 1 0 0 (26) 761 318 511 168 250 150
Notes to the table
1 The Executive Directors are paid in sterling. All amounts have been translated to US dollars based on the prevailing rate at the date of payment or award.
2 Afonso Reis e Sousa was appointed as a Director on 1 September 2021. The 2021 figures reflect the period from 1 September to 31 December 2021.
3 Following the financial restatement in relation to the 2021 financial year, and in line with our Remuneration policy, the bonuses awarded to the Executive Directors for 2021 have been recalculated. This resulted in a reduction of the total bonus
in respect of 2021 in the amount of £106,621 for Mr Iskander and £19,189 for Mr Reis e Sousa. This reflects a reduction in the 2021 Group Net Profit outcome from US$35 million to US$3m, reducing the pay-out under this element from 43% of
maximum to 0%.
Further notes to the table – methodology
a Salary and fees – the cash paid in respect of 2022.
b Benefits – the taxable value of all benefits paid in respect of 2022, including private health insurance and appropriate life assurance.
Sami Iskander received a car allowance during the period.
c Cash in lieu of pension and other benefits – our Executive Directors receive a cash allowance in place of pension contributions.
This reflects the application of the Company’s remuneration policy. Directors do not receive specific pension contributions from the Company.
d Annual bonus. The value in respect of 2021 for Afonso Reis e Sousa has been pro-rated for time, based on the period from his appointment as an Executive Director.
e Long-term incentives – 6% of the 2020 awards under the Performance Share Plan will vest on 27 April 2023. A value of US$943.00 is due to vest for
Afonso Reis e Sousa, pro-rated for time, based on the vesting period from his appointment as an Executive Director. This value represents an estimate
of the market value of the shares that are due to vest, based on a three-month average share price of 98.05 pence (1 October to 31 December 2022).
Of the value due to vest, £(1,516) of the figure is attributed to a share price depreciation of 195.85 pence per share, based on an actual award price of 293.9 pence.
The 2021 value for Mr Reis e Sousa (relating to awards which vested in March 2022) has been revised from last year’s report from US$377 to US$293,
based on the actual share price of 114.50 pence at the date of vesting on 23 March 2022.
f Total fixed remuneration is the total of (a) base salary, (b) taxable benefits and (c) cash in lieu of pension and other benefits.
g Total variable remuneration is the total of (d) annual cash bonus and (e) long-term incentives, less the restatement adjustment amount.
Directors’ remuneration report continued
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Annual bonus
The nancial elements of our annual bonus comprise 60% of the overall weighting, while the
remainder of the annual bonus (40%) is subject to metrics typically covering strategic areas such
as: health and safety, customer and service quality; growth; people; sustainability (ESG); energy
transition; and strategic initiatives. The table below sets out the outcomes for the Executive Directors
against our nancial targets:
Performance targets
Measure
Weighting
US$m
Threshold
US$m
Target
US$m
Maximum
US$m
Actual 2022
outcome
US$m
Pay-out
as %
Group EBIT
1
20% 95 114 135 (205) 0%
Group order intake 20% 2,900 3,848 4,800 1,927 0%
Group free cash ow
2
20% (57) 20 118 (188) 0%
As a % of maximum 0%
As a % of salary earned
(out of 120% for nancial elements) 0%
1 Measured as Group business performance earnings before interest and tax (see note A4 in Appendix A of the consolidated financial
statements).
2 The Group free cash flow measure for the purposes of the annual bonus performance target is a management reporting metric
calculated as free cash flow generated from operating activitiesand investing activities, less interest paid, repayment of finance lease
principal and amounts received from non-controlling interests (see note A7 in Appendix A of the consolidated financial statements).
Group-level performance continued to be affected by continued delays in the award of new projects
in the E&C division during the year, in addition to additional costs incurred on legacy contracts. This
was partially mitigated by strong performance in both Asset Solutions and IES during 2022, and the
continued reduction in Group overheads.
Overall though, this resulted in us missing our targets for Group EBIT, new order intake and Group
free cash ow. We did however complete a number of projects in our legacy E&C portfolio, with E&C
bidding continuing at record levels. We have continued the growth of the Asset Solutions portfolio and
in the new energies sector, so that Petrofac is well placed to benet from the investments to be made
in offshore wind.
Sami Iskander
Sami Iskander joined Petrofac in November 2020, initially as Deputy CEO. He was appointed
Group Chief Executive in January 2021. On 22 November 2022, the Company announced that
Mr Iskander would be stepping down as Group Chief Executive and leaving the business with effect
from 31 March 2023. In view of his performance throughout 2022 of progressing against strategic
measures and his comprehensive and professional handover to his successor, the Committee felt that
it was appropriate to award a bonus for the year. After due review and considering his performance in
a year of exceptionally challenging circumstances, theCommittee agreed to a performance rating of 4
on our 5-point scale. This has resulted inthebonus outcome as reported on page 138.
Afonso Reis e Sousa
Mr Reis e Sousa was appointed Chief Financial Ofcer and an Executive Director with effect from
1 September 2021. The Board has been very pleased with Mr Reis e Sousa’s performance in his
rst full year as CFO. Mr Reis e Sousa has shown excellent relationship skills with our investors,
banks and bondholders, having been instrumental in extending our existing debt facilities and
successfully managing various nancing issues. He has also demonstrated sound management of
the development of various legacy IT issues and achieving readiness for the roll-out of our cloud-
based ERP system across the Group. In view of this performance, the Committee agreed with the
assessment of his personal performance as a 3.5 on our 5-point scale, which resulted in the bonus
outcome as reported on page 138.
Loss of office
Mr Iskander had a 12-month notice period and, following the decision taken for him to step down
from his role as Group Chief Executive and Executive Director, he worked his notice period from
November 2022. The balance of this notice period was paid on his termination date of 31 March
2023. In addition, he received certain payments covering loss of benets during the balance of his
notice period. Details of these payments can be found on page 149.
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Share plan interests awarded in 2020
Performance Share Plan
The performance conditions for the 2020 PSP award are set out below. As a result of the over-maximum achievement of one out of ve of the strategic objectives, 6% of this award is due to vest on 27April 2023.
TSR element (70% of award):
The comparator group and vesting schedule are set out in the following tables:
Comparator group:
Daelim Industrial Co KBR, Inc Technip FMC
Fluor Corporation Maire Tecnimont Tecnicas Reunidas
GS Engineering & Construction Corp McDermott International, Inc Worley Parsons
Hyundai E&C Saipem Wood Group (John)
JGC Corporation Samsung Engineering Co., Ltd
Strategic element (30% of award):
Performance
measure
Weighting Threshold On-target Maximum Out-turn Vesting (as a %
of maximum)
Vesting %
(actual)
Protecting our core E&C business E&C net margin 6% 5% 5.75% 6.5% (20.9)% 0.00% 0.00%
Best-in-class delivery Global cost challenge savings 6% US$100m US$125m US$150m US$280m 100.00% 6.00%
Positioning for a return to growth New orders 6% U S $17, 50 0 m US$19,250m US$21,000m US$5,820m 0.00% 0.00%
Improving operational efficiencies Cash conversion 6% 75% 87.5% 100% <0% 0.00% 0.00%
Enhancing returns ROCE
2
6% 13% 17. 5% 22% <0% 0.00% 0.00%
Strategic element vesting 20% of maximum
Overall award vesting 6% of maximum
2 Given the impact of the capital raise completed in November 2021, the ROCE measure has been normalised.
Share plan interests awarded during the financial year
Deferred Bonus Plan
As reported in the 2021 Annual report and accounts, any bonus is typically paid to Executive Directors half in cash and half in deferred shares under the Deferred Bonus Plan, vesting in equal tranches over
one, two and three years from the date of award. Details of the actual number of shares granted are set out on page 144. The following table provides details of the awards made under the DBP during 2022:
Type of award Face value
Sami Iskander
Deferred Bonus shares
£293,533
Afonso Reis e Sousa
1
£63,943
1 Afonso Reis e Sousa was appointed as a Director on 1 September 2021. The figures reflect the bonus payment made for the period from 1 September to 31 December 2021.
Awards were made to Sami Iskander and Afonso Reis e Sousa on 4 April 2022, along with other members of senior management, based on a share price of 104.50 pence. The face values shown in the table
above have been calculated on this basis. This share price represents the three-day average share price up to the respective date of award.
Vesting schedule:
Three-year performance against the comparator group
Vesting as a % of maximum
Less than median performance 0%
Median performance
1
25%
Upper quartile performance
1
100%
Vesting 0% (Below median performance)
1 Straight-line vesting operates between these points.
Directors’ remuneration report continued
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Share plan interests awarded during the financial year
Performance Share Plan
As detailed in our remuneration policy, PSP awards are granted over ordinary shares, representing an opportunity to receive Petrofac shares if performance conditions are met over the relevant three-year
period. The number of shares under award is determined by reference to a percentage of base salary. Details of the actual number of shares granted are set out on page 144. The following table provides
details of the awards made under the PSP. Performance for these awards is measured over the three nancial years from 1 January 2022 to 31 December 2024.
Type of award Face value
Face value
(% of salary)
Threshold vesting
(% of face value)
Maximum vesting
(% of face value)
End of performance
period
Sami Iskander
Performance
shares
£1,345,499 200%
25% 100% 31 Dec 24
Afonso Reis e Sousa £800,000 200%
Awards were made to Sami Iskander and Afonso Reis e Sousa on 4 April 2022, along with other members of senior management, based on a share price of 104.50 pence. The face values shown have been
calculated on this basis. This share price represents the three-day average share price up to the respective date of award. While the Committee recognises that the share price had fallen over the preceding
year, it was satised that the level of awards remained appropriate given that they remain subject to a cap, such that the maximum value that can be delivered in the year of vesting is limited to three times the
face value of the award at the time of grant. This three times face value cap applied to all PSP awards made to the Company’s Executive team in 2022.
TSR element (50% of award):
The comparator group and vesting schedule for 2022 are set out in the following tables:
Comparator group:
Aker Solutions Maire Tecnimont Samsung Engineering Co., Ltd
Fluor Corporation Saipem Technip FMC
Hunting SNC Lavalin Tecnicas Reunidas
KBR, Inc Subsea7 Worley Parsons
Wood Group (John)
Strategic element (50% of award):
The remaining 50% of the 2022 award is based on eight key strategic measures, four of which broadly cover business nancial and operational performance and four which cover areas promoting
sustainability. We believe these measures align our incentives with the delivery of critical long-term strategic goals. Each measure issubject to stretching targets over the three-year period. At this stage, the
Committee considers the precise targets for 2022 to be commercially sensitive. However, we intend to provide detailed disclosure of targets and performance against those targets following the end of the
performance period. The key strategic priorities and associated measures for the 2022 award are as follows:
Key strategic priorities Performance measures 2022 to 2024 (each with a weighting of 6.25%)
Conserving cash Cash conversion
Maintain competitiveness Overhead ratio
Rebuild backlog Book-to-bill
Deliver operational excellence Operational performance (on-schedule, on-budget)
Promote sustainability Energy transition (revenue from new energies); diversity (FTSE Women Leaders);
greenhouse gas emissions; employee engagement
Vesting schedule:
Three-year performance against the comparator group Vesting as a % of maximum
Less than median performance 0%
Median performance
1
25%
Upper quartile performance
1
100%
1 Straight-line vesting operates between these points.
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Single total figure of remuneration for the Chair and Non-executive Directors
The following table sets out the total remuneration for the Chair and Non-executive Directors for the year ended 31 December 2022, with prior year gures also shown. All gures are presented in US dollars.
At 1 January 2022, the Non-executive Directors received a basic fee of £67,500 per annum, of which £5,000 per quarter was used to purchase Petrofac Limited shares. The basic Non-executive Director fee
had been reduced by 10% from £75,000 to £67,500 from 1 April 2020, in line with the reduction received by the wider Petrofac workforce. Additional fees of £15,000 per annum are paid for acting aseither
the Chair of a Board Committee (excluding the Nominations Committee) or as the Senior Independent Director. The Chair received a fee of £288,000 per annum. This fee had been reduced by 10% from
£320,000 per annum with effect from 1 April 2020, in line with the wider Petrofac workforce arrangement. A total of £20,000 per quarter of the Chair fee is used to purchase Petrofac Limited shares.
With effect from 1 April 2022, the fees for the Chair and the Non-executive Directors were reinstated to pre-2020 levels.
Committee membership and other responsibilities
Fees
US$’000
Audit
Committee
Compliance and
Ethics Committee
Nominations
Committee
Remuneration
Committee Other
2022 2021
Non-executive Directors
1
René Médori Chair Chair of the Board 375 395
Matthias Bichsel Member Member Member Chair Senior Independent Director 124 134
Sara Akbar Member Member Member 88 93
Ayman Asfari
2
Member 88 20
David Davies Chair Member Member 106 113
Francesca Di Carlo
4
Chair Member Member 98 93
Former Directors
Andrea Abt
3
Member Member Member 36 93
George Pierson
3,4
Member Chair Member 44 113
Notes to the table
1 Non-executive Directors are paid in either Sterling, Euros or US dollars. All amounts above have been translated to US dollars based on the prevailing rate at the date of payment.
2 As reported in the 2021 Annual report and accounts, Ayman Asfari agreed to receive no Board fees between 1 January and 11 October 2021. Accordingly, the 2021 fee represents the period from 12 October 2021 to 31 December 2021. The value of the 2019 PSP award, which
vested on 23 March 2022, has been revised from last year’s report from US$22,305 to US$17,353, based on the actual share price of 114.50 pence achieved on the date of vesting. The value of the 2020 PSP award, which will vest on 27 April 2023 is US$9,351. This value
represents an estimate of the market value of the shares that are due to vest, based on a three-month average share price of 98.05 pence (1 October to 31 December 2022).
3 Andrea Abt and George Pierson stepped down from the Board and ceased to be Non-executive Directors from 26 May 2022. The 2022 figures reflect the period from 1 January 2022 to this date.
4 George Pierson was Chair of the Compliance and Ethics Committee and received the fee for this position from 1 January 2022 until he stepped down from the Board on 26 May 2022. Francesca Di Carlo received the fee for this position from 27 May 2022 until the end of theyear.
Directors’ remuneration report continued
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Statement of Directors’ shareholdings and share interests
Directors’ shareholdings held during the year and as at 31 December 2022 and share ownership guidelines
The number of shares held by Directors during the year and as at 31 December 2022 or as at the date of departure are set out in the table below, along with the progress against their respective
shareholdingrequirements:
Director
% of salary held under
shareholding guidelines
Shares owned outright
at 31 December 2022
(or at the date of leaving)
Interests in share incentive schemes,
awarded subject to performance
conditions at 31 December 2022
Shares owned outright
at 31 December 2021
Sami Iskander
1,5
15% 437,391 3,047, 217 217,3 91
Afonso Reis e Sousa
2,5
4% 43,683 1,037,045 36,813
Matthias Bichsel – 68,219 – 50,331
René Médori – 416,528 – 194,972
Sara Akbar – 68,219 – 50,331
Ayman Asfari
3
>10 0% 84,972,155 127,871 88,947,298
David Davies – 89,567 – 71,679
Francesca Di Carlo – 60,795 – 42,907
Former Directors
Andrea Abt
4
– 59,017 – 50,331
George Pierson
4
– 137,467 – 128,781
1 Sami Iskander was expected to build up a shareholding of three times salary. He was appointed as Group Chief Executive on 1 January 2021. He stepped down from the Board on 31 March 2023.
2 Afonso Reis e Sousa is expected to build up a shareholding of two times salary. He was appointed as an Executive Director on 1 September 2021 and is yet to fulfil this shareholding guideline.
3 Ayman Asfari ceased to be an Executive Director from 31 December 2020. He is, however, expected to retain 100% of the shareholder guideline (three-times salary) for the first year following departure, and 50% of the guideline for the second year following departure.
Hehassubstantially exceeded this requirement.
4 Andrea Abt and George Pierson ceased to be Directors on 26 May 2022. The shares owned outright reflect the position on the date they stepped down from the Board.
5 For the purposes of determining Executive Director shareholdings, the individual’s salary as at 31 December 2022 or at the date of leaving, and the share price as at 31 December 2022 of 70.25 pence per share have been used.
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Directors’ remuneration report continued
Share interests – share plan awards at 31 December 2022
Share awards held at the year end, or at the date of leaving, including awards of shares made to Executive Directors during 2022, are shown in the table below:
Director and date of grant Plan
Number of shares
under award at
31 December 2021
1
Shares granted
in year
Shares lapsed
in year
Shares vested
in year
Total number of
shares under award at
31 December 2022
Dates from which shares
ordinarily vest
Sami Iskander
23 April 2021 PSP 1,759,658 – – – 1,759,658 23 April 2024
4 April 2022 PSP – 1,287,559 – – 1,287,559 4 April 2025
4 April 2022
6
DBP – 280,893 – – 280,893 4 April 2023
3,328,110
Afonso Reis e Sousa
6 March 2019
2
PSP 17, 6 79 – 16,619 1,060 0 23 March 2022
6 March 2019
3
DBSP 5,636 – – 5,636 0 23 March 2022
6 March 2020
4
PSP 25,801 – – – 25,801 7 March 2023
6 March 2020
3
DBSP 12,596 – – 6,296 6,300 7 March 2023
25 May 2021 PSP 245,694 – – – 245,694 25 May 2024
4 April 2022 PSP – 765,550 – – 765,550 4 April 2025
4 April 2022
6
DBP – 61,189 – – 61,189 4 April 2023
1,104,534
Ayman Asfari
6 March 2019
2,5
PSP 203,180 – 190,989 12,191 0 23 March 2022
6 March 2020
4,5
PSP 127,871 – – – 127,871 7 March 2023
127,871
1 The award amounts disclosed under the PSP are the maximum number that may vest if all performance conditions attached to the awards are satisfied in full.
2 Following the end of the three-year performance period in respect of the March 2019 PSP award, the performance conditions were partially satisfied, with 6% of the maximum award vesting on 23 March 2022.
3 On 23 March 2022, a third of the 2019 Deferred Bonus Share Plan (DBSP) award and a third of the 2020 DBSP award vested. The share price on the date of vesting was 114.50 pence. Following his appointment to the Board on 1 September 2021, no further awards under the DBSP
will be made to AfonsoReise Sousa.
4 Shares awarded on 6 March 2020 partially satisfied the performance conditions and therefore 6% of the maximum award vested on 27 April 2023. Based on a share price of 63.85 pence, which is the closing share price on 26 April 2023 (being the latest practicable date prior to the
adoption of this report by the Committee), the value of the award made to Afonso Reis e Sousa, pro-rated for time based on the vesting period from when he was appointed as an Executive Director, would be £494. The value of the award made to Ayman Asfari would be £4,899.
5 The shares awarded to Ayman Asfari have been pro-rated for time, based on his retirement date of 31 December 2020.
6 Awards were made during the year to the Executive Directors under the new Deferred Bonus Plan. This plan was approved by shareholders at the 2021 AGM.
This represents the end of the audited section of the report.
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Historical TSR performance and Group Chief Executive remuneration outcomes
The chart below compares the TSR performance of the Company over the past 10 years with the TSR of the FTSE 250 Index. This index has been chosen because it is a recognised equity market index.
The table below the chart summarises the Group Chief Executive's single gure for total remuneration, annual bonus pay-outs and long-term incentive plan vesting levels as a percentage of maximum
opportunity over this period.
Petrofac
FTSE 250
01 Jan 13 01 Jan 14 01 Jan 15 01 Jan 16 01 Jan 17 01 Jan 18 01 Jan 19 01 Jan 20 01 Jan 21 01 Jan 22 01 Jan 23
0
50
100
150
200
250
300
350
TSR – rebased to 1 January 2011
Source: Datastream
TSR chart – one-month average basis
Group Chief Executive 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Group Chief Executive single figure of remuneration (US$’000) 2,658 1,245 1,162 1,817 1,946 2,250 1,153 999 1,646
1
1,415
Annual bonus pay-out (as a % of maximum opportunity) 59% 0% 0% 47.5% 60.4% 69.9% 0% 0% 37%
1
30%
PSP vesting out-turn (as a % of maximum opportunity) 13% 0% 0% 0% 0% 0% 15.2% 16.1% 6% 6%
1. Following the financial restatement in relation to the 2021 financial year, and in line with our Remuneration policy, the decision was taken by the Committee to recalculate the 2021 bonus awarded to Mr Iskander. This resulted in a reduction of the total bonus of £106,621. The figure
shown in the table above reflects this restated amount. Further details are set out on page 138.
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Pay ratios of Group Chief Executive to UK employees
The table below illustrates the pay ratio of the Group Chief Executive to the 25th, median and 75th percentile of the total remuneration of the full-time equivalent UK employees.
Financial Year ended Method 25th percentile pay ratio (lower quartile) 50th percentile pay ratio (median) 75th percentile pay ratio (upper quartile)
31 December 2022 Option A 1:18 1:14 1:12
31 December 2021 Option A 1:21 1:17 1:16
The Group Chief Executive’s total remuneration is calculated on the same basis as the single gure of remuneration table set out on page 138. The lower, median and upper quartile employee’s remuneration
was calculated on full-time equivalent data as at 31 December 2022. Option A was chosen as it is considered to be the most accurate way of identifying the best equivalents of 25th, 50th and 75th percentile
gures and is aligned with best practice and investor expectations.
In reviewing the employee pay data, the Committee is satised that the individuals identied within each category appropriately reect the employee pay prole at those quartiles, and that the overall picture
presented by the ratios is consistent with our pay, reward and progression policies for UK employees.
The following table provides further information on the total pay gures used for each quartile employee and the salary component within this:
Financial Year ended Element of pay CEO remuneration
25th percentile pay ratio
(lower quartile)
50th percentile pay ratio
(median)
75th percentile pay ratio
(upper quartile)
31 December 2022 Salary £6 67,06 3 £52,026 £67,585 £80,274
Total remuneration £1,13 8,5 6 6 £62,620 £80,125 £91,522
Our Group Chief Executive pay ratio at the median has reduced slightly from 1:17 in 2021 to 1:14 in 2022. Our pay ratio is at the lower end of the range, which is reective of the highly skilled and technically
challenging nature of our roles across the UK, and also due to our long-term incentive plan payments being very low over the last ten years.
Directors’ remuneration report continued
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Annual percentage change in Directors’ remuneration compared with average employee remuneration
In accordance with The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019, as applicable to an equivalent UK company, the table below illustrates the
percentage change in each Executive and Non-executive Directors’ total remuneration, including salary, benets (excluding cash allowance in lieu of pension) and annual bonus for executives, and annual fees
for non-executives, compared with a representative group of the Company’s employees. For these purposes, we have used all UK-based employees as the comparator group, as this represents the most
appropriate comparator group for reward purposes:
% change in
base salary
2022/2021
% change in
base salary
2021/2020
% change in
benefits
2022/2021
% change in
benefits
2021/2020
% change in
annual bonus
2022/2021
% change in
annual bonus
2021/2020
René Médori
1
8.3% (2.7)% – – – –
Matthias Bichsel
1
5.8% (1.9)% – – – –
Andrea Abt
1,6
(57.9)% (2.7)% – – – –
Sara Akbar
1
8.3% (2.7)% – – – –
Ayman Asfari
1,5
392.2% (97.7 )% – – – –
David Davies
1
6.8% (2.2)% – – – –
Francesca Di Carlo
1,7
21.6% (2.7)% – – – –
George Pierson
1,6
(58.2)% (2.2)% – – – –
Sami Iskander
2,3
2.6% – 0.2% – (16.0)% –
Afonso Reis e Sousa
2,4
– – – – – –
All UK-based employees 6.8% 5.3% 0% 0% (24)% 100%
1 For the Non-executive Directors, fees are paid in US dollars, Sterling or Euros as determined by each Director. The table sets out the change in total fees. Base fees were increased by 10% with effect from 1 April 2022. There were no changes
to the additional fees of £15,000 per annum, which are paid for acting as either the Chair of a Board Committee (excluding the Nominations Committee) or as the Senior Independent Director.
2 Base salary is paid in sterling but translated into US dollars based on the prevailing rate at the date of payment (as set out on page 138).
3 Sami Iskander was appointed as an Executive Director on 1 January 2021. Following the financial restatement in relation to the 2021 financial year, and in line with our Remuneration policy, the decision was taken by the Committee to
recalculate the 2021 bonus awarded to Mr Iskander. This resulted in a reduction of the total bonus of £106,621. Further details are set out on page 138.
4 Afonso Reis e Sousa was appointed as an Executive Director on 1 September 2021.
5 Ayman Asfari retired from the role of Group Chief Executive on 31 December 2020. He became a Non-executive Director with effect from 1 January 2021 and agreed to receive no Board fees between 1 January and 11 October 2021.
6 Andrea Abt and George Pierson stepped down from the Board and ceased to be Non-executive Directors from 26 May 2022. The 2022 figures reflect the period from 1 January 2022 to this date.
7 Francesca Di Carlo received the fee for the position of Chair of the Compliance and Ethics Committee from 27 May 2022 until the end of the year.
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Looking forward to 2023
Implementation of remuneration policy in 2023
This section provides an overview of how the Committee is proposing to implement our remuneration
policy in 2023.
Base salary
The table below shows the base salaries for 2023 effective 1 April 2023:
2023 basic salary
from 1 April 2023
2023 basic salary
from 1 January 2023
2022 basic salary
to 31 December 2022
Tareq Kawash
1
£675,000 n/a n/a
Afonso Reis e Sousa £420,000 £400,000 £400,000
1. Tareq Kawash was appointed as Group Chief Executive on 1 April 2023. Sami Iskander stepped down from the Board with effect from
31 March 2023. His salary at that date was £672,750.
Benefits
The benet framework will remain unchanged in 2023. However, it was agreed as part of his hiring
package to continue the arrangements that Mr Kawash received from his prior employer regarding
schooling. Accordingly, Mr Kawash will receive an amount of up to £40,000 per annum to pay for
school fees until his child completes secondary education within the next three years.
Cash allowances
The table below shows cash allowances for 2023:
Cash allowances 2023 Cash allowances 2022
Pension Car Pension Car
Tareq Kawash
1
6.2% of salary £20,000 n/a n/a
Afonso Reis e Sousa 6.2% of salary – 6.2% of salary –
1. Tareq Kawash was appointed as Group Chief Executive on 1 April 2023. Sami Iskander stepped down from the Board with effect from
31 March 2023. His benefits at that date were 7% of salary for pension and a £20,000 car allowance.
Joining arrangements for Tareq Kawash
On leaving his previous employer, Mr Kawash forfeited a number of incentive awards and, in line
with our recruitment policy, the Committee agreed to buy out these forfeited awards. In determining
the level of the buyout, the Committee took into account relevant factors including any performance
conditions attached to his forfeited awards, the likelihood of those conditions being met, and the
proportion of the performance periods remaining. Mr Kawash was accordingly granted an award of
£500,000 under the Deferred Bonus Plan. These shares are not subject to performance conditions
and will vest, subject inter alia, to continued employment, over the next two years, 25% after six
months, 25% after 12 months and the remaining 50% after 24 months from the date of award.
Relative importance of the spend on pay
The chart below illustrates the change in total remuneration, dividends paid and net prot from 2021
to 2022.
The gures presented have been calculated on the following bases:
• Dividends – dividends paid in respect of the financial year
• Net profit – our reported net profit in respect of the financial year. This is a key performance
indicator for the Company
• Total remuneration – represents total salaries paid to all Group employees in respect of the
financial year (see note 5c for an explanation as to how this value is calculated). Note that this
includes social security costs, benet and pension costs and share-based payment expenses.
Spend in respect of the financial year US$m
Dividends 0 0%
0
Net profit/(loss) 3 >(100)%
(284)
Total remuneration 768 ( 7. 8 )%
708
2021 2022
Directors’ remuneration report continued
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Loss of office for Sami Iskander
Following the decision taken for Mr Iskander to step down from his role as Group Chief Executive,
he worked his notice period from November 2022. The balance of this notice period of £433,141
was paid to him on his termination date of 31 March 2023. In addition, he received additional
payments covering loss of benets during the balance of this notice period, specically: health and
life insurance of £20,000; car allowance of £12,877; and cash in lieu of pension contributions of
£30,320. Mr Iskander will be treated as a good leaver in respect of his outstanding share awards but
will receive no bonus or PSP award in respect of the 2023 nancial year. The bonus amount paid in
respect of the 2022 nancial year is set out on page 138.
Chair and Non-executive Director remuneration
The table below sets out the fee structure payable to the Chair and Non-executive Directors from
1 April 2023:
2023 fees
Chair of the Board fee £320,000
Basic Non-executive Director fee £75,000
Board Committee Chair fee £15,000
Senior Independent Director fee £15,000
Annual bonus
The maximum annual bonus opportunity for Executive Directors will remain at 200% of base salary
for 2023. The table below sets out the nancial elements, which comprise 60% of the total annual
bonus:
Financial measures
Weighting in
total bonus
Group earnings before interest and tax
1
20%
Group net order intake 20%
Group free cash flow 20%
1 Measured as Group business performance before separately disclosed items.
The remaining 40% of the annual bonus will comprise robust metrics, which will typically cover
strategic areas such as: health and safety, customer and service quality, growth, people, sustainability
(ESG), energy transition, and strategic initiatives. This will provide the Committee with the ability to
consider not only nancial achievements, but also the wider health of the Company and the manner
and behaviours by which our performance has been delivered. The Committee will set stretching
2023 targets and will provide disclosure at the end of the performance year.
Any bonus will be paid to Executive Directors half in cash and half in deferred shares under the
Deferred Bonus Plan, which will vest in equal tranches over one, two and three years from the date
ofaward.
The annual bonus is subject to malus and clawback provisions as set out in more detail in our
remuneration policy. The Committee also retains the option to apply an additional discretion as
deemed appropriate, based on the performance of the Company or the relevant Director during
thenancial year under review.
Performance Share Plan
For 2023, in line with the Remuneration Policy, as set out on page 132, Mr Kawash will receive an
award of 300% of base salary following his appointment to the Board and Mr Reis e Sousa will
receive an award of 200% of base salary.
As for previous years, and recognising recent share price performance, the Committee has retained
the cap of three times face value that can be delivered from the 2023 PSP award. Other than in
exceptional circumstances (for which the Committee would provide justication), it is intended that
the maximum value that can be delivered in the year of vesting will be limited to three times face value
of the award at grant. This three times face value cap will also apply to PSP awards made to the
Company’s Executive team in 2023.
For 2023, the PSP framework will remain at 50% relative TSR and 50% strategic elements. Using
a number of nancial strategic measures, as well as those around ESG and our move into energy
transition solutions, will demonstrate alignment with the long-term goals of the Company and its
stakeholders.
1) TSR element (50% of award)
The tables below set out the TSR comparator group for the purposes of the 2023 awards and
the vesting schedule used to determine the performance outcome. The TSR comparator group is
unchanged from the prior year:
Aker Solutions Maire Tecnimont Subsea7 Tecnicas Reunidas
Fluor Corporation Saipem Samsung Engineering Co., Ltd Worley Parsons
Hunting SNC Lavalin Technip FMC Wood Group (John)
KBR, inc
Vesting schedule
Three-year performance against the comparator group Vesting as a % of maximum
Less than median performance 0%
Median performance
1
25%
Upper quartile performance
1
100%
1 Straight-line vesting operates between these points.
PETROFAC LIMITED | Annual report and accounts 2022
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2) Strategic element (50% of award)
The remaining 50% of the 2023 PSP award will be subject to three-year strategic performance
conditions. For the 2023 awards, the Committee will set stretching targets to key strategic priorities.
These strategic priorities and the associated measures for the 2023 award will cover longer-
term objectives such as: rebuilding our backlog and margin enhancement, cash management,
improving the balance sheet, accelerating our delivery in new energy transition, enhanced efforts on
sustainability, diversity, and safety. The precise measures and percentage weightings will be proposed
by the new Group Chief Executive following consideration by the Group Executive Committee
and submitted for approval by the Remuneration Committee no later than 1 August 2023. These
measures will be shared in next year's Annual report and accounts.
Under each strategic priority, vesting for threshold performance will be 25% of maximum with straight-
line vesting up to 100% of maximum. The Committee considers that the precise nancial targets,
when set, for the 2023 to 2025 period will be commercially sensitive. However, detailed disclosure of
targets and performance against targets will be provided at the end of the performance period.
Any vested post-tax shares will be subject to an additional two-year holding period. In addition, where
participants have not reached the shareholding guideline target, they will be required to continue to
hold any shares after the holding period until the guideline is reached. PSP awards are subject to
malus and clawback provisions as set out in more detail in our remuneration policy. The Committee
also retains the option to apply an additional discretion as deemed appropriate, based on the
performance of the Company or the relevant Director during the nancial year under review.
Directors’ remuneration report continued
Post-employment shareholding guideline
Executive Directors are required to maintain a shareholding of 100% of their shareholding guideline (or
actual shareholding at the point of departure, if lower) for a period of 24 months following departure.
Awards granted under any Company long-term incentive plan, which have vested but are subject
to a holding period, will count towards the guideline (on a net of tax basis). The Company has
implemented a mechanism for Executive Directors by which to enforce the application of these post-
employment guidelines. As part of this arrangement, a restriction will be placed on shares held that
will prevent their sale or transfer without prior authorisation by the Company until the guideline has
been satised.
External board appointments
Executive Directors are normally entitled to accept one non-executive appointment outside the
Company with the consent of the Board. Any fees received may be retained by the Director. As at
thedate of this report, no Executive Director holds an externally paid non-executive appointment.
Consideration by the Directors of matters relating to Directors’ remuneration
Support for the Committee
During the year, the Committee received independent advice on executive remuneration matters from
Deloitte LLP (Deloitte), which was formally appointed as advisor by the Committee in October 2005.
Deloitte is a member of the Remuneration Consultants Group and, as such, voluntarily operates under
a code of conduct in relation to executive remuneration consulting in the UK.
The Committee has reviewed the advice provided by Deloitte during the year and is satised that it
has been objective and independent. Total fees received by Deloitte in relation to the remuneration
advice provided to the Committee during 2022 amounted to £52,650 based on the required time
commitment. During 2022, Deloitte did not provide any other services to the Company.
The Secretary to the Board acts as Secretary to the Committee. During the year, the Group Chief
Executive, Chief Financial Ofcer and the Group Director of Human Resources attended meetings
on an ad hoc basis at the invitation of the Committee and provided information and support as
requested. However, no individual was present when their own remuneration was being discussed.
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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Shareholder voting
The table below outlines the result of the advisory vote of the 2021 Directors’ remuneration report
received at the AGM held on 26 May 2022.
Annual Report on Remuneration
Number of votes cast excluding abstentions For Against Abstentions
332,490,305 247, 418,0 2 2 85,072,283 168,054
74.41% 25.59%
The Committee recognises that more than 20% of votes were cast against this resolution. As a
result, and in accordance with Provision 4 of the UK Code, engagement with key investors and proxy
advisors was undertaken to better understand the views expressed. Further information is set out on
page 107.
The table below outlines the result of the advisory vote of the 2019 Remuneration Policy received at
the AGM held on 15 May 2020. The Remuneration Policy will again be subject to shareholder review
at the upcoming AGM to be held on 23 June 2023.
Remuneration Policy report
Number of votes cast excluding abstentions For Against Abstentions
234,052,554 224,428,003 9,624,551 125,143
95.89% 4.11%
Governance
The Board and the Committee consider that, throughout 2022 and up to the date of this report,
theCompany has complied with the provisions set out in the UK Corporate Governance Code
relating to Directors’ remuneration. In addition, relevant guidelines issued by prominent investor
bodies and proxy voting agencies have been presented to and considered by the Committee
duringits discussions.
The Committee endeavours to consider executive remuneration matters in the context of alignmentwith
risk management and, during the year, had oversight of any related factors to be takeninto
consideration. The Committee believes that the remuneration arrangements in place do not raise
any health and safety, environmental, social or ethical issues, nor inadvertently motivate irresponsible
behaviour.
Availability of documentation
Service contracts and letters of appointment for all Directors are available for inspection by any
person at our registered ofce in Jersey and at our corporate services ofce in London. They will also
be available for inspection during the 30 minutes prior to the start of our 2023 AGM.
Annual General Meeting
As set out in my statement on pages 125 and 126, our Remuneration Policy and Annual Report on
Remuneration will be subject to advisory shareholder votes at the AGM to be held on 23 June 2023.
On behalf of the Board
MATTHIAS BICHSEL
Chair of the Remuneration Committee
27 April 2023
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Directors’ responsibilities
The Directors are responsible for preparing the Annual report and accounts and the nancial
statements in accordance with applicable law and regulations.
The Directors have chosen to prepare the nancial statements in accordance with International
Financial Reporting Standards (IFRS). The Directors are also responsible for the preparation of the
Directors’ remuneration report, which they have chosen to prepare, being under no obligation to
do so under Jersey law. The Directors are also responsible for the preparation of the corporate
governance report under the UK Listing Rules and FRC regulations.
Jersey company law (the ‘Law’) requires the Directors to prepare nancial statements for each
nancial period in accordance with generally accepted accounting principles. The nancial statements
are required by law to give a true and fair view of the state of affairs of the Company at the period
end and of the prot or loss of the Company for the period then ended. In preparing these nancial
statements, the Directors should:
• Select suitable accounting policies and then apply them consistently
• Make judgements and estimates that are reasonable
• Specify which generally accepted accounting principles have been adopted in their preparation
• Prepare the financial statements on a going concern basis unless it is inappropriate to presume
that the Company will continue in business
The Directors are responsible for keeping proper accounting records, which are sufcient to show
and explain the Company’s transactions and to disclose with reasonable accuracy at any time the
nancial position of the Company and enable them to ensure that the nancial statements prepared
by the Company comply with the requirements of the Law. They are also responsible for safeguarding
the assets of the Group and Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and nancial
information included on the Company’s website. Legislation in Jersey governing the preparation and
dissemination of nancial statements may differ from legislation in other jurisdictions.
Directors’ approach
The Board’s objective is to present a fair, balanced and understandable assessment of the
Company’s position and prospects, particularly in the Annual report and accounts, half-year results
announcement and other published documents and reports to Regulators. The Board has established
an Audit Committee to assist with this obligation.
Going concern
The Company’s business activities, together with the factors likely to affect its future development,
performance and position, are set out in the Strategic report on pages 6 to 25. The nancial position
of the Company, its cash ows, liquidity position and borrowing facilities are described in the nancial
review on pages 88 to 93. In addition, note 2.5 to the nancial statements includes the Company’s
objectives, policies and processes for managing its capital; its nancial risk management objectives;
details of its nancial instruments and hedging activities; and its exposures to credit and liquidity risk.
The Board monitors closely the Group’s cash ow forecasts and liquidity position throughout the year,
including monitoring nancial covenant headroom, to ensure it has sufcient nancial resources. In
addition, to support the going concern assessment, the Board robustly reviews the Group’s cash ow
forecasts over the Assessment Period, considering the committed facilities available to the Group.
The Board has considered several risks to these projections under a severe but plausible downside
scenario as set out in note 2.5 to the nancial statements and noted that the Group’s liquidity position
in this scenario is reliant on a small number of collections from clients which are not entirely within the
direct control of the Group.
Notwithstanding the material uncertainty noted above, the Directors have, as set out in note 2.5 to the
consolidated nancial statements, that the Group has adequate resources to continue in operational
existence for the period of at least 12 months from the date of signing the Group nancial statements
to 31 December 2024. Thus they continue to adopt the going concern basis of accounting in
preparing the annual nancial statements.
Responsibility statement of the Directors in respect of the Annual Report
Each of the Directors listed on pages 99 and 100 conrms that, to the best of their knowledge:
• The Annual report and accounts, taken as a whole, is fair, balanced and understandable, and
provides the information necessary for shareholders to assess the Company’s position and
performance, business model and strategy
• The financial statements, prepared in accordance with IFRS, give a true and fair view of the
assets, liabilities, financial position and profit of the Company and the undertakings included in
the consolidation taken as a whole
• The Strategic report includes a fair review of the development and performance of the business
and the position of the Company and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties that they face
By order of the Board
AFONSO REIS E SOUSA
Chief Financial Ofcer
27 April 2023
Directors’ statements
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152
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
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Pages
Independent auditor’s report to the members of Petrofac Limited 155
Consolidated income statement 166
Consolidated statement of other comprehensive income 167
Consolidated balance sheet 168
Consolidated statement of cash flows 169
Consolidated statement of changes in equity 170
Notes to the consolidated financial statements 171
Note 1 Corporate information 171
Note 2 Summary of significant accounting policies 171
Note 3 Revenue from contracts with customers 192
Note 4 Segment information 195
Note 5 Expenses and income 199
Note 6 Separately disclosed items 200
Note 7 Finance income/(expense) 202
Note 8 Income tax 203
Note 9 Earnings per share 205
Note 10 Dividends paid and proposed 206
Note 11 Deferred consideration 206
Note 12 Property, plant and equipment 207
Note 13 Non-controlling interests 208
Note 14 Goodwill 209
Note 15 Intangible assets 210
Note 16 Investments in associates and joint ventures 211
Note 17 Financial assets and financial liabilities 212
Note 18 Inventories 215
Note 19 Trade and other receivables 216
Note 20 Contract assets and contract liabilities 217
Note 21 Cash and short-term deposits 218
Note 22 Share capital and related reserves 218
Note 23 Employee Benefit Trust (EBT) shares 219
Note 24 Share-based payment plans 220
Note 25 Other reserves 223
Note 26 Interest-bearing loans and borrowings 224
Note 27 Provisions 225
Note 28 Trade and other payables 226
Note 29 Leases 226
Note 30 Commitments and contingent liabilities 228
Note 31 Related party transactions 228
Note 32 Accrued contract expenses 229
Note 33 Risk management and financial instruments 229
Note 34 Subsidiaries, associates and joint arrangements 232
Appendices 235
PETROFAC LIMITED | Annual report and accounts 2022
153
PETROFAC LIMITED | Annual report and accounts 2022
153
FINANCIAL STATEMENTS
Group financial statements
Opinion
We have audited the financial statements of Petrofac Limited (the ”parent company”) and its
subsidiaries (the ”Group”) for the year ended 31 December 2022 which comprise:
Group Parent company
Consolidated income statement for the year
ended 31 December 2022
Company income statement for the year ended
31 December 2022
Consolidated statement of comprehensive
income for the year ended 31 December 2022
Company statement of comprehensive income
for the year ended 31 December 2022
Consolidated balance sheet at 31 December
2022
Company balance sheet at 31 December 2022
Consolidated statement of cash flows for the
year ended 31 December 2022
Company statement of cash flows for the year
ended 31 December 2022
Consolidated statement of changes in equity for
the year ended 31 December 2022
Company statement of changes in equity for
the year ended 31 December 2022
Related notes 1 to 34 to the financial statements,
including a summary of significant accounting
policies
Related notes 1 to 24 to the financial statements
including a summary of significant accounting
policies
The financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards.
In our opinion:
• Petrofac Limited’s Group financial statements and parent company financial statements (the
financial statements) give a true and fair view of the state of the Group’s and of the parent
company’s affairs as at 31 December 2022 and of the Group’s loss and parent company’s profit
for the year then ended;
• the financial statements have been properly prepared in accordance with International Financial
Reporting Standards; and
• the financial statements have been properly prepared in accordance with the requirements of the
Companies (Jersey) Law 1991.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We are independent of the Group and parent company in accordance with the ethical requirements
that are relevant to our audit of the financial statements, including the UK FRC’s Ethical Standard as
applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or
parent company and we remain independent of the Group and parent company in conducting the
audit.
Material uncertainty related to going concern
We draw attention to note 2.5 in the financial statements. The Group has short term reliance on a
small number of material collections relating to the closing out of historical contracts, settlements
and advance payments from new awards which are not wholly within the control of management.
As stated in note 2.5, these events or conditions, indicate that a material uncertainty exists that may
cast significant doubt on the Group’s and parent company’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
We draw attention to the viability statement in the Annual Report on page 94, which indicates that
an assumption to the statement of viability is the receipt of a small number of material cash
collections, as described in the going concern assessment. The Directors consider that the material
uncertainty referred to in respect to going concern may cast significant doubt over the future
viability of the Group and company should these events not complete. Our opinion is not modified in
respect of this matter.
In auditing the financial statements, we have concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of
the directors’ assessment of the Group’s and parent company’s ability to continue to adopt the
going concern basis of accounting included the procedures below:
Independent Auditor’s Report
to the members of Petrofac Limited
154
PETROFAC LIMITED | Annual report and accounts 2022
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Going concern
modelling
• We gained an understanding of the approach taken by management to
assess going concern, to model cash flows and to measure covenants
over the forecast period.
• We agreed forecasts to the business plan approved by the Board in
early 2023, determining the appropriateness of adjustments for
subsequent developments, including the trading updates in December
2022 and April 2023.
• We agreed the cash position as at 31 March 2023 to management
accounts and tested the mathematical integrity of management’s modelling.
Financing
arrangements
and covenants
• We agreed the modelling of financing arrangements to contractual
terms, including related covenants. These included the revised financing
arrangements agreed in April 2023.
• With assistance from an EY Debt Advisory specialist, we critically assessed
management’s judgment that the banks would continue to be supportive
were covenants to be breached over the going concern period. This
included discussion with management’s external debt advisor.
E&C related cash flow
forecasts
• We challenged the quantum and timing of forecast receipts of material
contract receivables, reviewing available evidence including
correspondence with relevant third parties.
• We challenged the quantum and timing of cash flows forecast with
respect to material contract awards, focusing on those included in
management’s downside case. This included assessing management’s
conclusions as to the likelihood of these awards and the quantum and
timing of cash flows associated with the TenneT framework agreement
that was signed in April 2023.
• We challenged cash inflows relating to the collection of assessed
variation orders (AVOs), using our audit work on the quantum concluded
to be highly probable and the status of customer discussions in
assessing expected timing of receipt.
Other assumptions • We assessed forecast cashflows from oil production from PM304,
including comparing assumptions to our impairment work and forecast
oil prices to external benchmarks.
• We assessed cashflows for the Asset Solutions operating segment
against our understanding of the business obtained from other audit
procedures.
Mitigated severe but
plausible downside
case
• We evaluated the sensitivities modelled by management including
forming a view as to their severity.
• We assessed mitigating actions reflected in this sensitivity, with a focus on
challenging their appropriateness in terms of quantum and timing of
impacts on forecast cashflows.
EY downside
sensitivity
• EY performed further downside sensitivity analysis to assess the
robustness of liquidity under a combination of further downsides that we
identified as being individually plausible, including a delay in a significant
contract award and delays in the forecast receipt of AVOs.
Other considerations • We considered the appropriateness of the period of management’s
going concern assessment, being to 31 December 2024.
• We evaluated whether there were any events expected to occur beyond
the assessment period that should impact conclusions relating to going
concern.
• We considered management’s historical forecasting accuracy and the
consistency of the assessment with information obtained from other
areas of the audit, such as accounting estimates.
• We considered whether climate related risks could or should impact
management’s forecasts.
Disclosures • We assessed the appropriateness and completeness of disclosures in
the financial statements and elsewhere in the Annual Report with
respect to going concern.
In relation to the Group’s and parent company’s reporting on how they have applied the UK
Corporate Governance Code, we have nothing material to add or draw attention to:
• The directors’ statement in the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting; and
• The directors’ identification in the financial statements of the material uncertainty related to the
Group’s and parent company’s ability to continue as a going concern to 31 December 2024.
Our responsibilities and the responsibilities of the Directors with respect to going concern are
described in the relevant sections of this report. However, because not all future events or
conditions can be predicted, this statement is not a guarantee as to the Group’s and parent
company’s ability to continue as a going concern.
Independent Auditor’s Report
to the members of Petrofac Limited continued
PETROFAC LIMITED | Annual report and accounts 2022
155
Overview of our audit approach
Audit scope • We performed an audit of the complete financial information of five components and
audit procedures on specific balances for a further four components.
• The components where we performed full or specific audit procedures accounted
for 93% of the Group’s revenue, 93% of its business performance profit before tax
and 93% of total assets.
Key audit
matters
• Going Concern
• Revenue and margin recognition on fixed price engineering, procurement and
construction contracts
• Investigation into cost recognition for the Thai Oil Clean Fuels contract and related
prior year adjustment
• Significant fair value measurements
• Accounting for uncertain tax positions
• HMRC National Insurance inquiry
Materiality • Overall Group materiality of $10m which represents 0.38% of revenue.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance
materiality determine our audit scope for each company within the Group. Taken together, this
enables us to form an opinion on the consolidated financial statements. We take into account size,
risk profile, the organisation of the Group and effectiveness of group-wide controls, changes in the
business environment, the potential impact of climate change and other factors such as recent
internal audit results when assessing the level of work to be performed at each company.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we
had adequate quantitative coverage of significant accounts in the financial statements, we selected
nine components covering entities within the UAE, the UK, Malaysia and the USA, which represent
the principal business units within the Group. The primary audit team performs audit procedures
directly on those areas of accounting performed centrally, most notably in respect of certain of the
key audit matters, namely significant fair value measurements, uncertain tax positions and the
HMRC National Insurance enquiry.
Of the nine components selected, we performed an audit of the complete financial information of
five components (full scope components) which were selected based on their size or risk
characteristics. For the remaining four components (specific scope components), we performed
audit procedures on specific accounts within that component that we considered had the potential
for the greatest impact on the significant accounts in the financial statements either because of the
size of these accounts or their risk profile. The audit scope of these components may not have
included testing of all significant accounts of the component but will have contributed to the
coverage of significant accounts tested for the group.
Number
% Group
revenue
% Group
business profit
performance
before tax
% Group total
assets
Full scope components 5 82% 86% 83%
Specific scope components 4 11% 7% 10%
Total 9 93% 93% 93%
The primary audit team also performed specific procedures in respect of one further component.
Of the remaining components that together represent 7% of the Group’s revenue, none are
individually greater than 1% of the Group’s revenue. For these components, we performed other
procedures, including journal entry testing, analytical review, testing of consolidation entries,
intercompany eliminations and foreign currency translation calculations to respond to any potential
risks of material misstatement to the Group financial statements.
Changes from the prior year
The key change to our scoping from 2021 was the removal of one specific scope component as a
result of the contingent consideration associated with the disposal of the Group’s Mexican operations
having been settled in 2022 (as detailed in note 17 of the consolidated financial statements).
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed
to be undertaken at each of the components by us, as the primary audit engagement team, or by
component auditors from other EY global network firms operating under our instruction. Of the five
full scope components, audit procedures were performed on two of these directly by the primary
audit team, with the remainder performed by audit teams in the UAE, UK and Malaysia. For the four
specific scope components, audit procedures were performed on two of these directly by the
primary audit team, with the remainder performed by UAE and UK component teams.
Where the work was performed by component auditors, we determined the appropriate level of
involvement to enable us to determine that sufficient audit evidence had been obtained as a basis
for our opinion on the Group as a whole.
Independent Auditor’s Report
to the members of Petrofac Limited continued
156
PETROFAC LIMITED | Annual report and accounts 2022
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
The Group audit team performed a number of visits to component teams/locations designed to
ensure that the lead audit partner or his designate visits each of the key locations to exercise
oversight during key activities at the planning and execution phases. The nature and extent of these
visits were designed relative to the size of the component, and the division of responsibilities
between the local and primary team on the significant risk areas applicable to the component.
During the current year’s audit cycle, visits were undertaken by the primary audit team to the
component teams in the UAE (several visits), UK and Malaysia. In addition, the lead audit partner
visited the Thai Oil Clean Fuels contract in Thailand along with the component team from the UAE.
These visits involved discussing the audit approach with the component team and any issues
arising from their work, meeting with local management, attending planning and/or closing
meetings, and reviewing key audit working papers on risk areas. These visits were supplemented by
regular interactions with the component teams throughout the audit and review of relevant working
papers. Accordingly the primary audit team executed its responsibility for the scope and direction of
the audit process. This, together with the additional procedures performed at Group level, gave us
appropriate evidence for our opinion on the Group financial statements.
Climate change
Stakeholders are increasingly interested in how climate change will impact Petrofac Limited. The
Group has determined that the most significant future impacts from climate change on its
operations will be from managing the transition to a lower carbon economy and developing its
capabilities to unlock value for its clients as well as achieving its Net Zero targets. These are
explained on pages 37 to 48 in the required Task Force for Climate related Financial Disclosures and
on pages 78 to 87 in the principal risks and uncertainties. The Group has also explained its climate
commitments on page 38. All of these disclosures form part of the “Other information,” rather than
the audited financial statements. Our procedures on these unaudited disclosures therefore
consisted solely of considering whether they are materially inconsistent with the financial statements
or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated,
in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the
Group’s business and any consequential material impact on its financial statements.
The Group has explained in note 2.7 of the consolidated financial statements how climate change
has been reflected in the financial statements including how this aligns with their commitment to the
aspirations of the Paris Agreement to achieve net zero emissions by 2050. Significant judgements
and estimates relating to climate change are included in note 2.7.
Our audit effort in considering the impact of climate change on the financial statements was
focused on evaluating management’s assessment of the impact of climate risk, physical and
transition, their climate commitments, the effects of material climate risks and the significant
judgements and estimates disclosed in note 2.7 and whether these have been appropriately
reflected. As part of this evaluation, we performed our own risk assessment, supported by internal
climate change specialists, to determine whether there were risks of material misstatement in the
financial statements from climate change which needed to be considered in our audit.
We also challenged the Directors’ considerations of climate change risks in their assessment of
going concern and viability and associated disclosures.
Based on our work we have not identified the impact of climate change on the financial statements
to be a key audit matter or to significantly impact a key audit matter.
Key audit matters
Key audit matters (KAMs) are those matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in our
opinion thereon, and we do not provide a separate opinion on these matters. In addition to the
matter described in the material uncertainties related to going concern section, we have determined
the matters on the following pages to be the key audit matters to be communicated in our report.
Independent Auditor’s Report
to the members of Petrofac Limited continued
PETROFAC LIMITED | Annual report and accounts 2022
157
Risk Our audit response to the risk
Key observations communicated
to the Audit Committee
Revenue and margin recognition
on fixed price engineering, procurement
and construction (EPC) contracts
Refer to the Audit Committee Report (page 121);
Accounting policies (pages 178 to 180); and
Note 3 of the Consolidated Financial Statements
(page 192).
EPC contracts are entered into by the
Engineering & Construction (E&C) operating
segment. Total E&C revenue for the year was
US$1.3bn (2021: US$2.0bn) which represented
50% of Group revenue (2021: 64%).
Accounting for fixed price engineering,
procurement and construction contracts
requires significant judgement and estimation,
which increases the risk of bias or error and
subjects the process to the risk of management
override of controls.
Key areas of judgement and estimation which
directly impact revenue and contract margin
recognised are:
• recognition of variation orders and claims not
yet approved by the customer in contract
value;
• estimation of variable consideration in respect
of liquidated damages as a deduction to
contract value; and
• forecasting of costs to complete including
contingencies.
We consider that the risk in this area has
increased in the current year as a result of
challenges experienced across the Group’s
maturing portfolio of contracts, including
declining margin on certain contracts. In addition
there was an investigation into cost recognition
for the Thai Oil Clean Fuels contract in the year
(see the separate KAM on the following pages:
Investigation into cost recognition for the Thai Oil
Clean Fuels contract and related prior year
adjustment).
Our audit procedures on EPC contracts were performed mainly by the E&C component team based in the UAE with significant direct oversight and challenge by
the Group audit team.
Our audit involved detailed testing on contracts that we assessed as being the most significant and judgemental; these 12 contracts represent 87% of the
revenue subject to this risk. On the remaining 13%, we performed other procedures including analytical review, management enquiry and cost and accrual
testing where material.
See the separate KAM below relating to the Investigation into cost recognition for the Thai Oil Clean Fuels contract and related prior year adjustment.
Key controls
• Our audit procedures were primarily substantive in nature, however, we identified and assessed key controls over revenue recognition including:
– senior audit team members from the component and Primary Teams attended a selection of key quarterly contract review meetings held during the year; and
– transactional controls underpinning contract-related cost balances, including the purchase to pay and payroll process.
• See the separate KAM below for our response to weaknesses in internal control identified as a result of the investigation in the year into cost recognition for
the Thai Oil Clean Fuels contract.
Percentage of completion
• We re-performed percentage of completion calculations, testing the clerical accuracy of revenue recognised in line with IFRS 15 Revenue from Contracts with
Customers.
• On a sample basis, we traced actual costs incurred in the period to supporting evidence, including purchase invoice and payment.
Variation orders and claims and liquidated damages
• We inspected the contractual terms relevant to recognised variations and claims to ensure their recognition was supported by enforceable rights under the
relevant contract.
• We challenged management assertions in relation to the recognition of unapproved variation orders and claims, and the non-recognition of potential
liquidated damages by inspecting correspondence and minutes of meetings between senior management and the customer and by reviewing the track
record of settlements with the customer and/or in the wider region.
• We inspected supporting documentation and tested a sample of underlying costs supporting the recognition of variation orders and claims not yet approved
in contract value. In assessing such claims, we also considered the extent of the recognised value as compared to the gross claims identified.
• Where management had engaged a third-party claims specialist or had obtained legal advice, we obtained and reviewed their reports, met directly with the
specialist and assessed their competency and objectivity.
• We tested contract cost accruals on a sample basis by agreeing components of accruals to purchase orders, progress reports and payroll data.
Costs to complete including contingencies
• We tested cost to complete estimates by agreeing project material and subcontractor costs to quotations or rate schedules and manpower costs to
mobilisation reports.
• We assessed changes in cost estimates in the year, including those reflected in trading updates issued by the Group in December 2022 and April 2023,
gaining an understanding of the drivers of these and challenging their completeness and appropriateness , in particular for onerous contracts. Also see the
separate key audit matter below (Investigation into cost recognition for the Thai Oil Clean Fuels contract and related prior year adjustment) for incremental
procedures performed in response to this matter.
• We performed analytical procedures comparing budgets and prior period estimates and retrospectively assessed the accuracy of historical forecasts.
• We challenged management’s assessment and the legal basis for the treatment of subcontractor claims.
• We challenged the adequacy of the contract contingencies included in forecast costs to complete with respect to the physical progress on the project and
remaining costs to complete based on our understanding of the project status, Petrofac’s experience and consideration of any contra-indicators, including
external sources. We analysed the movements throughout the life of the contract, compared against similar contracts and challenged management’s
conclusions in light of remaining contract tenor and the associated risks.
Disclosures
• We assessed the adequacy of the Group’s disclosures about the degree of estimation and judgment involved in determining the revenue and margin to be
recognised on the Group’s fixed price engineering, procurement and construction contracts.
We detail our considerations
with respect to issues
identified by an investigation
in the year with respect to the
accounting for contract costs
in the separate KAM below
(Investigation into cost
recognition for the Thai Oil
Clean Fuels contract and
related prior year adjustment).
Other than these matters, and
after adjustments reflected by
management following audit
challenge, we concluded that
revenue and margin
recognition on fixed price
engineering, procurement and
construction contracts has
been appropriately
recognised in accordance
with the requirements of IFRS
15.
We are also satisfied that the
significant judgements and
estimates associated with
revenue recognition have
been appropriately disclosed
in note 2 to the Group
financial statements.
Independent Auditor’s Report
to the members of Petrofac Limited continued
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Risk Our audit response to the risk
Key observations communicated
to the Audit Committee
Investigation into cost recognition for the
Thai Oil Clean Fuels contract and related
prior year adjustment
Refer to the Audit Committee Report (page 121)
and Note 2.9 of the Consolidated Financial
Statements (page 188)
• Following questions raised by the Group’s
Internal Audit function around the timing of
cost recognition on the Thai Oil Clean Fuels
contract, an onerous contract for accounting
purposes, the Group initiated an investigation
into this matter. This was performed by the
Petrofac Group Investigations Team (GIT) with
assistance in certain areas by an external
forensics specialist.
• The investigation identified contract cost
information available ahead of the completion
of the 2021 Annual report and accounts
which had not been appropriately considered
for financial reporting purposes in the prior
year. This was determined to be a significant
deficiency in internal controls with respect to
this contract.
• As a result of analysis of this information, the
company has recorded a prior year
adjustment in the financial statements,
increasing contract losses by US$48m as at
31 December 2021. Details of this adjustment
are reflected in note 2.9 to the consolidated
financial statements. Management concluded
that no adjustment was required as at 31
December 2020 as it is not practicable to
determine what, if anything, this should have
been.
This is a new key audit matter in the current year.
Our response to this matter was led by the Group Team with assistance from EY Forensics specialists (EY FIS) and the E&C component team.
Engagement of EY Forensics specialists (EY FIS)
• The audit team engaged EY FIS to assist the team in assessing the GIT investigation and procedures performed by the specialist engaged by management.
This included the sufficiency, appropriateness and completeness of the investigation performed and the competency and objectivity of individuals
undertaking it.
• EY FIS shadowed the investigation, engaging extensively with GIT and the specialist engaged by management. They performed certain investigation steps
and designed and performed additional procedures to gain assurance over the nature and extent of procedures performed.
• EY FIS challenged the GIT team on aspects of the investigation scope. Additional procedures were performed by GIT in response.
Completeness of issues identified
• We challenged management and the Board as to how they had satisfied themselves that there were not similar occurrences on other contracts. We reviewed
their approach and the resulting findings.
• We designed and performed incremental audit procedures on the Group’s E&C contracts to identify if there were similar issues arising beyond the Thai Oil
Clean Fuels contract. These included assessing the exposure of individual projects to similar issues based on their stage of completion and progression over
2021 and 2022, performing incremental enquiries of management and reconfirming audit evidence around project information used for contract accounting
for a number of projects
Prior year adjustment
• We audited the prior year adjustment determined by management. We challenged judgments and/or assumptions used in this calculation, assessing these
against the evidence obtained through the investigation, the conclusions of GIT and the specialist engaged by management and our knowledge of the project
obtained from other audit procedures. Specifically, this focussed on the cut-off between costs estimated to have been identifiable in periods prior to 31
December 2021 and those relating to 2022.
• We challenged management as to whether components of the prior year adjustment could reasonably be attributed to 2020, by assessing information arising
from the investigation that was available prior to the 2020 Annual report and accounts, enquiry around this of relevant management, and consideration of
audit evidence previously obtained.
• We challenged the impact of this prior year adjustment on covenant compliance in 2021.
Disclosures
• We audited the disclosure of the prior year adjustment as reflected in note 2.9 to the financial statements.
• We reviewed other disclosures in the Annual report and accounts, assessing whether these accurately and sufficiently disclosed the investigation and its
implications as well as management and the Board’s response to the control weaknesses identified relating to this project.
We are satisfied that the
scope and approach of the
investigation was sufficient to
appropriately explore the
concerns raised by Internal
Audit and to identify
information and evidence of
potential relevance to the
cumulative accounting for the
Thai Oil Clean Fuels contract
as at 31 December 2021 and
2022.
We concluded that there is a
reasonable basis for the prior
year adjustment reflected in
the financial statements.
Given the passage of time
and the nature of these cost
estimates, it is impracticable
to retrospectively determine
what costs were known about
at the end of December 2020
and so, in accordance with
IAS8, the prior year
adjustment has been
recorded in 2021.
Our procedures, and those of
management, have not
identified any similar
occurrences relating to other
contracts.
We conclude that related
disclosures in the financial
statements and in other
information included in the
Annual Report are
appropriate and sufficient.
Independent Auditor’s Report
to the members of Petrofac Limited continued
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159
Risk Our audit response to the risk
Key observations communicated
to the Audit Committee
Significant fair value measurements
Refer to the Accounting policies (page 178); and
Notes 6 and 17 of the Consolidated Financial
Statements (pages 200 and 212).
There are a number of significant fair value
estimates made by management in the preparation
of the financial statements which require significant
assumptions and judgments to be made, namely:
Recoverable value of PM304: during 2022, the
Group reviewed the recoverable amount of its
Block PM304 oil and gas assets, recognising a
reversal of impairment of $6 million (2021
restated: impairment of US$33 million). In making
this assessment there are a number of key
assumptions including volumes of reserves and
related production profile, future oil prices and the
likelihood of securing a PSC license extension
beyond 2026. During 2022, the Group identified
inconsistencies between the assets and liabilities
included in the carrying value of Block PM304’s
and the cashflow forecasts used to estimate
recoverable amount. This resulted in the prior
period(s) consolidated income statement and
consolidated statement of financial position being
restated.
JSD6000 deferred consideration: the deferred
consideration associated with the disposal of the
JSD6000 installation vessel is carried at fair
value, which at year-end was determined to be
US$56m (2021 US$55m). The fair value of the
deferred consideration is dependent on key
assumptions around the Group’s partner’s
continued intent and capability to complete the
construction and commissioning of the vessel
within the due timeframe and the market for
such a vessel when it is ready for sale.
Embedded derivative in respect of the revolving
credit facility: the embedded derivative was
entered into as part of the Group’s refinancing
exercise which took place in October 2021 and
is carried at fair value through profit and loss.
The fair value is impacted by key assumptions
around the Group’s credit rating.
We consider that the risk has remained
consistent with the prior year. In the prior year
this area also included the contingent
consideration associated with the disposal of the
Group’s Mexican operations, but the contingent
consideration has been received during 2022
and therefore this component of the risk has
been resolved.
Our audit procedures on these areas were performed by the Group audit team, with assistance from our component team in Malaysia for our evaluation of the
recoverable value of PM304.
Recoverable value of PM304
We obtained management’s impairment assessment and challenged the significant underlying assumptions. Our procedures included:
• assessing the design and implementation of the key controls over the process to estimate the recoverable value of PM304;
• making enquiries around field performance and understanding the basis for estimates of recoverable reserves and resources and the forecast production
profile prepared by Petrofac’s reserves specialists. We also assessed the competence and objectivity of these specialists;
• making enquiries of key management and reviewing external correspondence to validate assumptions around the uncertainty of securing a license extension
beyond 2026;
• independently validating the future oil price assumptions made in the cashflow forecasts by comparing to external forecasts made by peers, banks, brokers
and consultants;
• testing the clerical accuracy of the impairment model;
• involving EY valuations specialists to assist us in concluding on the appropriateness of the discount factor applied;
• challenging management on the consistency of the assets and liabilities included in the carrying value of Block PM304 and the forecast cashflows used to
estimate the asset’s recoverable value; and
• auditing the appropriateness of the prior year adjustment booked by management.
JSD6000 deferred consideration
We obtained management’s assessment of the fair value of JSD6000 deferred consideration and challenged the underlying assumptions. Our procedures
included:
• Assessing the design and implementation of the key controls over the process to fair value the JSD6000 deferred consideration;
• Obtaining management’s valuation analysis for the deferred consideration receivable, which is underpinned by a vessel valuation report from a third-party
specialist engaged by management;
• Assessing the competency and objectivity of management’s specialist;
• Making enquiries of management as to the future plans for the vessel, as it approaches completion, and meeting directly with management’s external
valuation specialist. We inspected relevant evidence, including the year end vessel progress report; and
• Engaging internal EY valuation specialists to assist us in independently evaluating management’s external valuer’s findings and considering any contra-
evidence.
Embedded derivative in respect of RCF
We obtained management’s valuation analysis for the embedded derivative and challenged the underlying assumptions. Our procedures included:
• Assessing the design and implementation of the key controls over the process to fair value the embedded derivative in respect of the RCF; and
• Engaging internal EY valuation specialists to assist us in preparing an independent valuation of the embedded derivative.
Disclosures
We assessed the appropriateness and completeness of the disclosures in the financial statements, including the appropriateness of the related sensitivity
disclosures and the classification of these fair value movements as separately disclosed items.
We have concluded that the
recoverable value of Block
PM304 (and related reversal
of impairment in the year) and
the fair value of the JSD6000
deferred consideration and
embedded derivative in
respect of the RCF have been
appropriately determined.
We concluded that the prior
year adjustment relating to
Block PM304 was
appropriate.
We reviewed the disclosures
in Note 2 to the Group
financial statements regarding
the significant estimation
uncertainties inherent in
accounting for these items
and have concluded that the
disclosures are appropriate.
Independent Auditor’s Report
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Risk Our audit response to the risk
Key observations communicated
to the Audit Committee
Accounting for uncertain tax positions
Refer to the Audit Committee Report (page 122);
Accounting policies (pages 177 to 178); and
Note 8 of the Consolidated Financial Statements
(page 203).
The Group operates in multiple tax jurisdictions
where uncertain tax treatments may be
challenged at a later date by the relevant
authorities.
Liabilities of US$59 million (2021 restated:
US$85 million) are held principally in respect of
tax deductions previously taken, transfer pricing
arrangements and ongoing tax audits. This is an
area which requires management to exercise
significant judgement as to the likelihood of an
adverse outcome for the Group, and estimation
as to the likely outflow in the event of such a
finding.
We consider that the risk associated with this
key audit matter has remained consistent with
the prior year.
Our primary tax audit team based in the UK coordinated our audit approach to uncertain tax treatments. Local tax experts in relevant jurisdictions were involved
as needed to provide input on specific local tax matters.
Completeness of identified exposures and claims
• We assessed the design and implementation of key controls over management’s process to identify and evaluate uncertain tax positions.
• We considered potential implications for new contracts entered into in existing or new jurisdictions for the Group.
Assessment of exposures and claims
• We evaluated the risks associated with identified exposures and any claims or assessments made by tax authorities to date. We also inspected
documentation, considering whether developments in any ongoing tax audits during the year necessitated a change in estimate on any provision.
• We also considered whether any interest or penalties should apply based on relevant legislation and historical experience with the authority in question.
Disclosures
• We have also reviewed the disclosures in Note 2 to the Group financial statements regarding the significant estimation uncertainties inherent in accounting for
these items and have concluded that the disclosures are appropriate.
We are satisfied that the
amounts recognised in
respect of uncertain tax
treatments have been
accounted for in accordance
with the requirements of IFRIC
23 Uncertainty over Income
Tax Treatments and represent
management’s best estimate
based on the Group’s
experience in the relevant
jurisdictions and historical tax
assessments concluded with
the tax authorities.
Independent Auditor’s Report
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161
Risk Our audit response to the risk
Key observations communicated
to the Audit Committee
HMRC National Insurance Inquiry
Refer to the Audit Committee Report (page 121);
and Note 30 of the Consolidated Financial
Statements (page 228).
HMRC are seeking to establish whether a UK
subsidiary of the Group, is a host employer for
offshore employees and therefore liable for
payment of employers National Insurance
Contributions between 1999 and 2014.
In 2020, HMRC provided a decision notice to the
Group, informing it of its conclusion that the
Group subsidiary is liable for unpaid
contributions plus interest in the amount of £130
million. Including interest accumulated to the
2022 year-end, and the total exposure translates
to US$156m as at 31 December 2022.
The Group strongly disagrees with the merit of
the decision notice and filed an appeal. There
have been a number of procedural
developments during 2022 and early 2023.
Management asserts that under the terms of
business with end customers, Petrofac has a
contractual right of recovery for a portion of the
amounts due.
Judgement is required to assess whether the
matter satisfies the recognition criteria for a
provision, or should continue to be disclosed as
a contingent liability.
We consider that the risk associated with this
key audit matter has remained consistent with
the prior year.
Our audit procedures on these areas were performed by the Group audit team, with assistance from EY tax experts with specialised knowledge.
Assessment of the claim
• We obtained an update from management on current year developments in the matter and inspected correspondence between the Group and HMRC.
• We engaged an EY taxation specialist familiar with the relevant National Insurance legislation and HMRC dispute resolution to assist us in forming an
independent view on the likelihood of an adverse outcome for the Group.
• Together with our specialist we inspected advice received by the group from external legal counsel engaged on this matter and confirmed this advice directly
with external counsel.
Disclosures
We assessed the adequacy of the Group’s updated disclosure of the matter in Note 30 to the Group financial statements.
We have concluded that the
facts and circumstances
continue to support the
position taken by the group at
this time, that disclosure as a
contingent liability, remains
appropriate at 31 December
2022 and that the related
disclosure is adequate and
appropriate.
Independent Auditor’s Report
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
In the prior year, our auditor’s report included a key audit matter in relation to the Conclusion of the
SFO investigation. In the current year, this matter is no longer relevant following the conclusion of
this investigation and the related £77 million penalty being settled in 2022.
In the prior year, our auditor’s report also included a key audit matter in relation to the Recoverability
of deferred tax assets. In the current year, this is no longer considered a key audit matter following a
reduction in the balance recognised to from US$18m to US$1m in the year. As a result, this matter
did not require a high level of involvement from senior members of the engagement team in 2020,
leading to the removal of the recoverability of deferred tax assets as a Key Audit Matter this year.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of
identified misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably
be expected to influence the economic decisions of the users of the financial statements. Materiality
provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be US$10.0 million (2021: US$8.0 million), which is
0.38% (2021: 0.25%) of Group revenue. We believe that stakeholders and users of the financial
statements continue to be focused on revenue and revenue-related metrics, such as new order
intake and backlog. Revenue has historically also been a leading indicator for the profitability and
cash flow generating ability of the Group. Thus, we determined that revenue continues to represent
an appropriate basis on which to set materiality in 2022. Materiality was set at this level in planning
the audit following the closure of the SFO investigation. We revisited our determination of materiality
in light of actual results and audit findings. Whilst additional audit procedures were undertaken in
certain areas in response to audit findings, we did not consider that our overall materiality should be
revised.
We determined materiality for the Parent Company to be US$10.0 million (2021: US$9.4 million),
based on 0.5% (2021: 0.5%) of total assets
During the course of our audit, we reassessed initial materiality and concluded that no changes
were necessary.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce
to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control
environment, our judgement was that performance materiality was 50% (2021: 50%) of our planning
materiality, namely US$5.0m (2021: US$4.0m).
We determined performance materiality for the Parent Company was 50% (2021: 50%) of our
planning materiality namely US$5.0 million (2021: US$4.7 million).
Audit work at component locations for the purpose of obtaining audit coverage over significant
financial statement accounts is undertaken based on a percentage of total performance materiality.
The performance materiality set for each component is based on the relative scale and risk of the
component to the Group as a whole and our assessment of the risk of misstatement at that
component. In the current year, the range of performance materiality allocated to components was
US$1.0m to US$5.0m (2021: US$0.8m to US$4.0m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences
in excess of $0.5m (2021: $0.4m), which is set at 5% of planning materiality, as well as differences
below that threshold that, in our view, warranted reporting on qualitative grounds. We also agreed
that we would report to the Audit Committee any uncorrected reclassification misstatements above
2% of the any primary financial statement line items to which the misstatement relates.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality
discussed above and in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1 to
152, including the Strategic Report and Governance Report other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information contained within
the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements, or our knowledge obtained in the
course of the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of the other information, we are required
to report that fact.
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163
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies
(Jersey) Law 1991 requires us to report to you if, in our opinion:
• proper accounting records have not been kept by the parent company, or proper returns
adequate for our audit have not been received from branches not visited by us; or
• the financial statements are not in agreement with the parent company’s accounting records and
returns; or
• we have not received all the information and explanations we require for our audit.
Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-
term viability and that part of the Corporate Governance Statement relating to the Group’s
compliance with the provisions of the UK Corporate Governance Code specified for our review by
the Listing Rules.
Notwithstanding the impact of the matters disclosed in the material uncertainties related to the
going concern section, based on the work undertaken as part of our audit, we have concluded that
each of the following elements of the Corporate Governance Statement is materially consistent with
the financial statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set out on page 152;
• Directors’ explanation as to its assessment of the Company’s prospects, the period this
assessment covers and why the period is appropriate set out on page 94;
• Director’s statement on whether it has a reasonable expectation that the Group will be able to
continue in operation and meets its liabilities set out on page 152;
• Directors’ statement on fair, balanced and understandable set out on page 120;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on pages 76 to 87;
• The section of the annual report that describes the review of effectiveness of risk management
and internal control systems set out on page 118; and;
• The section describing the work of the audit committee set out on pages 114 to 122.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 152, the directors
are responsible for the preparation of the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and
parent company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless the directors either intend
to liquidate the Group or parent company or to cease operations, or have no realistic alternative but
to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud.
The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. The extent to which our procedures are
capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those
charged with governance of the company and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the
Group and determined that the most significant are International Financial Reporting Standards,
the Companies (Jersey) Law 1991, the UK Corporate Governance Code, the UK Bribery Act,
employment law, environmental regulations, health and safety, and tax legislation in the
jurisdictions where the group operates.
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
• We understood how Group is complying with those frameworks by making enquiries of
management, those charged with governance, internal audit, those responsible for legal and
compliance procedures and the company secretary. We corroborated our enquiries through our
review of board minutes and papers provided to the Audit Committee, as well as by considering
the results of our audit procedures across the group. Out assessment considered the tone set
from the top by senior management and the emphasis placed on a culture of honest and ethical
behaviour.
• We assessed the susceptibility of the Group’s financial statements to material misstatement,
including how fraud might occur, by meeting with individuals from various parts of the business to
gather their views. We considered the programmes and controls that the Group has established
to address the risks identified, or that otherwise prevent, deter or detect fraud, and how senior
management monitors those programmes and controls. We engaged our forensics specialists to
provide input on specific aspects of our audit approach to risk of fraud and non-compliance with
laws and regulations;
• Based on this understanding we designed our audit procedures to identify non-compliance with
such laws and regulations that could give risk to a material misstatement in the financial
statements. These procedures included:
– those discussed above with respect to key audit matters, including revenue and margin
recognition and responding to the investigation into the Thai Oil Clean Fuels contract,
– addressing the risk of management override, including around judgments and estimates,
through audit work on the identified key audit matters and other procedures including journal
entry testing;
– assessment of the nature and cause of prior year adjustments for wider implications on the
financial statements and control environment;
– the provision of specific instructions to component teams including a specific work programme
to address the risks of bribery and corruption;
– enquiries of Group management, those charged with governance, legal counsel, and internal
audit.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
Other matters we are required to address
• We were first appointed by the company to audit the financial statements for the year ending
31 December 2005 and subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and reappointments is 18 years, covering the years
ending 31 December 2005 to 31 December 2022.
• The audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Article 113A of
the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to
the company’s members those matters we are required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
DANIEL TROTMAN
for and on behalf of Ernst & Young LLP
London
27 April 2023
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Notes
Business
performance
(1)
US$m
Separately
disclosed
items
US$m
Reported
2022
US$m
Business
performance
(1)
(restated)
(2)
US$m
Separately
disclosed
items
(restated)
(2)
US$m
Reported
(restated)
(2)
2021
US$m
Revenue 3 2 ,5 91 – 2 , 591 3,0 38 – 3,0 3 8
Cost of sales
5a (2 ,667 ) – (2 ,6 67 ) (2,9 0 8 ) – (2,9 0 8 )
Gross profit (76 ) – (76 ) 13 0 – 13 0
Selling, general and administration expenses
5b,6 (17 5 ) (7 ) (182 ) (17 5 ) (17 7 ) (352 )
Expected credit loss reversal
5e 23 – 23 25 – 25
Other operating income
5f 23 – 23 8 – 8
Other operating expenses
5g (5 ) – (5 ) (7 ) – (7 )
Operating loss (2 10 ) (7 ) (2 17 ) (19 ) (17 7 ) (19 6 )
Finance income
7 7 – 7 15 – 15
Finance expense
6,7 (98 ) (18 ) (11 6 ) (5 3 ) (28 ) (8 1 )
Share of net profit of associates and joint ventures
16 5 – 5 7 – 7
Loss before tax (29 6 ) (25 ) (3 2 1 ) (50 ) (20 5 ) (25 5 )
Income tax (expense)/credit
8a (15 ) (1 ) (16 ) 56 (4 3 ) 13
Net (loss)/profit (3 11 ) (26 ) (3 37 ) 6 (24 8 ) (242 )
Attributable to:
Petrofac Limited shareholders (28 4 ) (2 6 ) (310 ) 3 (24 8 ) (24 5 )
Non-controlling interests
13 (27 ) – (2 7 ) 3 – 3
(3 11 ) (26 ) (3 37 ) 6 (24 8 ) (242 )
(Loss)/earning per share (US cents)
Basic
9 (5 5.2 ) (5.0 ) (60. 2 ) 0.8 (68.5 ) ( 6 7. 7 )
Diluted
9 (5 5.2 ) (5.0 ) (60. 2 ) 0.8 (68.5 ) ( 6 7. 7 )
(1) This measurement (before separately disclosed items) is shown by the Group as a means of measuring underlying business performance (i.e. excluding separately disclosed items); see note 2 and Appendix A.
(2) The prior year numbers are restated; see note 2.9.
166
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Consolidated income statement
For the year ended 31 December 2022
Notes
2022
US$m
2021
(restated)
(1)
US$m
Reported net loss (3 37 ) (242 )
Other comprehensive income to be reclassified to consolidated income statement in subsequent periods (post-tax)
Net changes in fair value of derivatives designated as cash flow hedges
25 (1 ) 1
Foreign currency translation gains
25 14 3
Other comprehensive income to be reclassified to consolidated income statement in subsequent periods 13 4
Other comprehensive (loss)/income reclassified to consolidated income statement (post-tax)
Hedging losses reclassified to consolidated income statement 7 –
Foreign currency translation losses reclassified to the consolidated income statement
25 – 8
Other comprehensive income reclassified to consolidated income statement 7 8
Total comprehensive loss for the year (3 17 ) (230 )
Attributable to:
Petrofac Limited shareholders (29 0 ) (23 3 )
Non-controlling interests
13 (27 ) 3
(3 17 ) (230 )
(1) The prior year numbers are restated; see note 2.9.
PETROFAC LIMITED | Annual report and accounts 2022
167
Consolidated statement of comprehensive income
For the year ended 31 December 2022
Notes
2022
US$m
2021
(restated)
(1)
US$m
1 Jan 2021
(restated)
(1)
US$m
Assets
Non-current assets
Property, plant and equipment
12 244 269 293
Goodwill
14 96 10 1 101
Intangible assets
15 25 27 34
Investments in associates and joint ventures
16 30 34 35
Other financial assets
17 151 209 202
Deferred consideration
11 56 55 55
Deferred tax assets
8c 1 18 61
Current assets
Inventories
18 17 23 8
Trade and other receivables
19 739 668 877
Contract assets
20 1, 3 2 9 1, 5 8 0 1, 6 5 2
Other financial assets
17 10 3 18 3 14 8
Income tax receivable 26 20 9
Cash and short-term deposits
21 450 620 684
Total assets 3, 267 3, 8 07 4 ,15 9
Notes
2022
US$m
2021
(restated)
(1)
US$m
1 Jan 2021
(restated)
(1)
US$m
Equity and liabilities
Equity
Share capital
22 10 10 7
Share premium
22 2 51 2 51 4
Capital redemption reserve
22 11 11 11
Employee Benefit Trust shares
23 (5 6 ) (69 ) (8 8 )
Other reserves
25 56 42 43
Retained earnings (14 3 ) 16 8 414
Equity attributable to Petrofac Limited shareholders 12 9 413 3 91
Non-controlling interests
13 (17 ) 10 7
Total equity 112 423 39 8
Non-current liabilities
Interest-bearing loans and borrowings
26 – – 50
Provisions
27 13 5 14 3 17 1
Other financial liabilities
17 14 6 19 5 16 6
Deferred tax liabilities
8c 28 29 38
Current liabilities
Trade and other payables
28 865 1,0 9 0 8 87
Contract liabilities
20 13 6 77 12 0
Interest-bearing loans and borrowings
26 79 9 76 4 75 0
Other financial liabilities
17 114 81 17 9
Income tax payable 79 12 6 191
Accrued contract expenses
32 759 79 8 1,1 3 4
Provisions
27 94 81 75
Total liabilities 3 ,15 5 3,3 84 3 ,76 1
Total equity and liabilities 3, 267 3, 8 07 4 ,15 9
The consolidated financial statements on pages 166 to 234 were approved by the Board of
Directors on 27 April 2023 and signed on its behalf by Afonso Reis e Sousa – Chief FinancialOfficer.
(1) The prior year numbers are restated see note 2.9.
168
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Consolidated balance sheet
At 31 December 2022
Consolidated statement of cash flows
For the year ended 31 December 2022
Notes
2022
US$m
2021
(restated)
(1)
US$m
Operating activities
Loss before tax
(3 2 1 ) (255 )
Separately disclosed items
6 25 205
Loss before tax and separately disclosed items
(29 6 ) (50 )
Adjustments to reconcile profit before tax and separately
disclosed items to net cash flows:
Depreciation, amortisation and business performance impairment
5a, 5b 79 68
Expected credit loss reversal recognised
5e (2 3 ) (25 )
Share-based payments
24 6 7
Difference between other long-term employment benefits paid
and amounts recognised in the consolidated income
statement
27 (10 ) (29 )
Net finance expense before separately disclosed finance expense
7 91 38
Net movement in other provisions
27 12 (2 )
Share of net profit of associates and joint ventures
16 (5 ) (7 )
Net foreign exchange gains and losses
16 35 –
Net other non-cash items
(3 ) (3 )
(11 4 ) (3 )
Working capital movements:
Inventories
Trade and other receivables
(10 1 ) 2 11
Contract assets
20 268 78
Restricted cash
(2)
17 26 (93 )
Net derivative contracts – designated and undesignated
(2)
17 6 (13 )
Trade and other payables
(95 ) 12 0
Contract liabilities
20 62 (4 0 )
Accrued contract expenses
(38 ) (336 )
Net working capital movements
Cash generated from operations
Separately disclosed items paid – operating costs
(11 5 ) (28 )
Net income taxes paid
(52 ) (42 )
Net cash flows used in operating activities
(14 6 ) (1 6 1 )
Notes
2022
US$m
2021
(restated)
(1)
US$m
Investing activities
Purchase of property, plant and equipment (38 ) (4 3 )
Payments for intangible assets
15 (8 ) (10 )
Contingent consideration paid
17 (2 ) –
Dividends received from associates and joint ventures
16 8 8
Receipts from Shanghai Zhenhua Heavy Industries Co Ltd in
respect of JSD6000 vessel
17 5 –
Receipts from joint operation partners in respect of leases
17 28 59
Net proceeds from disposal of subsidiaries, including receipt
against deferred and contingent consideration
17 98 9
Proceeds from disposal of property, plant and equipment 1 5
Interest received 6 10
Net cash flows generated from investing activities 98 38
Financing activities
Issue of shares net of associated transaction costs
22 – 25 0
Proceeds from interest-bearing loans and borrowings, net of
debt acquisition cost
17 62 1, 4 8 4
Repayment of interest-bearing loans and borrowings
17 (36 ) (1, 47 0 )
Repayment of lease liabilities
29 (54 ) (9 9 )
Separately disclosed items – refinancing-related costs paid – (23 )
Interest paid (8 6 ) (36 )
Purchase of Company’s shares by Employee Benefit Trust
23 – (2 )
Net cash flows (used in)/generated from financing
activities (11 4 ) 10 4
Net decrease in cash and cash equivalents (16 2 ) (19 )
Net foreign exchange difference (8 ) –
Cash and cash equivalents at 1 January 620 639
Cash and cash equivalents at 31 December
21 450 620
(1) The prior year numbers are restated; see note 2.9.
(2) Working capital movements in respect of restricted cash and net derivative contracts were previously reported cumulatively as
movement in other net current financial assets.
PETROFAC LIMITED | Annual report and accounts 2022
169
Attributable to Petrofac Limited shareholders
Issued
share
capital
US$m
Share
premium
US$m
Capital
redemption
reserve
US$m
Employee
Benefit Trust
shares
(1)
US$m
(note 23)
Other
reserves
US$m
(note 25)
Retained
earnings
US$m
Total
US$m
Non-controlling
interests
US$m
Total
equity
US$m
At 1 January 2021 (as previously reported) 7 4 11 (88 ) 43 42 6 403 7 410
Impact of prior year adjustments (note 2.9) – – – – – (12 ) (12 ) – (12 )
At 1 January 2021 (restated)
(2)
Reported net (loss)/profit (restated)
(2)
Other comprehensive income – – – – 12 – 12 – 12
Total comprehensive income/(loss) (restated)
(2)
Issue of own shares (note 22) 3 247 – – – – 250 – 25 0
Purchase of Company’s shares by Employee Benefit Trust (note 23) – – – (2 ) – – (2 ) – (2 )
Issue of Company’s shares by Employee Benefit Trust (note 23) – – – 21 (20 ) (1 ) – – –
Credit to equity for share-based payments charge (note 24) – – – – 7 – 7 – 7
At 31 December 2021 (restated)
(2)
At 1 January 2022 10 2 51 11 (69 ) 42 16 8 413 10 423
Reported net loss – – – – – (310 ) (310 ) (27 ) (3 37 )
Other comprehensive income – – – – 20 – 20 – 20
Total comprehensive income/(loss) – – – – 20 (310 ) (2 9 0 ) (2 7 ) (3 17 )
Issue of Company’s shares by Employee Benefit Trust (note 23) – – – 13 (12 ) (1 ) – – –
Credit to equity for share-based payments charge (note 24) – – – – 6 – 6 – 6
At 31 December 2022 10 2 51 11 (56 ) 56 (14 3 ) 12 9 (17 ) 11 2
(1) Shares held by Petrofac Employee Benefit Trust.
(2) The prior year numbers are restated; see note 2.9.
170
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Consolidated statement of changes in equity
For the year ended 31 December 2022
PETROFAC LIMITED | Annual report and accounts 2022
171
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177
234
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Appendix A
The Group references Alternative Performance Measures (APMs) when evaluating the Group’s reported financial performance, financial position and cash flows that are not defined or specified under
International Financial Reporting Standards (IFRS). The Group considers that these APMs, which are not a substitute for or superior to IFRS measures, provide stakeholders with additional useful
information byadjusting for certain reported items which impact upon IFRS measures or, by defining new measures, aid the understanding of the Group’s financial performance, financial position and cash
flows. These are aligned to measures which are used internally to assess business performance in the Group’s processes when determining compensation.
APM Description Closest equivalent IFRS measure Adjustments to reconcile to primary statements Rationale for adjustments
Group’s business performance net profit
attributable to Petrofac Limited
shareholders (note A1)
Measures net profitability Group’s net profit/(loss) Petrofac presents business performance APM in
the consolidated income statement as a means
of measuring underlying business performance.
The business performance net profit measure
excludes Separately Disclosed Items (SDI) (note
2.8). Business performance diluted earnings per
share is calculated only when the reported result
is aprofit
The intention of this measure is to
provide users of the consolidated
financial statements with a clear and
consistent presentation of underlying
business performance
Business performance basic and diluted
earnings per share attributable to
Petrofac Limited shareholders (note A2)
Measures net profitability Basic and diluted earnings per share
Business performance earnings before
interest, tax, depreciation
and amortisation (EBITDA) (note A3)
Measures operating profitability Operating profit/(loss) Excludes SDI (note 2.8), depreciation,
amortisation, business performance impairment
and includesshare of net profits from associates
and joint ventures
The intention of this measure is to
provide users of the consolidated
financial statements with a clear and
consistent presentation of underlying
operating performance
Business performance earnings before
interest and tax (EBIT) (note A4)
Measures operating profitability Operating profit/(loss) Excludes SDI (note 2.8) and includes share of
net profits from associates and joint ventures
The intention of this measure is to
provide users of the consolidated
financial statements with a clear and
consistent presentation of underlying
operating performance
Business performance effective tax rate
(ETR) (note A5)
Measures tax charge Income tax expense Excludes income tax expense or credit related
to SDI
The intention of this measure is to
provide users of the consolidated
financial statements witha clear and
consistent presentation ofunderlying
business performance ETR
Capital expenditure (noteA6) Measures net cash cost of capital
investment
Net cash flows generated from/(used in)
investing activities
Excludes dividends received from associates
and joint ventures, net loans repaid by/(paid to)
associates and joint ventures, proceeds
fromdisposal of property, plant and equipment,
proceeds from disposal of subsidiaries and
interestreceived
Excludes items not considered relevant
to capital investment
Free cash flow (note A7) Measures net cash generated after
operating and investing activities to
finance returns to shareholders
Net cash flows generated from/(used in)
operating activities plus net cash flows
(used in)/generated from investing
activities less interest paid and the
repayment of finance lease principal
plus amounts received from non-
controlling interest
n/a n/a
PETROFAC LIMITED | Annual report and accounts 2022
235
APM Description Closest equivalent IFRS measure Adjustments to reconcile to primary statements Rationale for adjustments
Working capital, balance sheet measure
(note A8)
Measures the investment in working
capital
No direct equivalent. Calculated as
inventories plus trade and other
receivables plus contract assets plus
restricted cash minus trade and other
payables minus contract liabilities minus
accrued contract expenses
n/a n/a
Return on capital employed (ROCE)
(note A9)
Measures the efficiency of generating
operating profits from capital employed
No direct equivalent. Calculated as
business performance earnings before
interest, tax and amortisation (EBITA)
divided by capital employed (average
total assets less average current
liabilities after adjusting for certain
leases)
n/a n/a
Cash conversion (note A10) Measures the conversion of EBITDA into
cash
No direct equivalent. Calculated as cash
generated from operations divided by
business performance EBITDA
n/a n/a
Net lease liabilities (note A11) Measures net lease liabilities No direct equivalent. Calculated as gross
lease liabilities less joint operation
partners’ share of leases in respect of
right-of-use assets relating to Block
PM304 in Malaysia
n/a n/a
Net debt/net cash (note A12) Measures indebtedness No direct equivalent. Calculated as
interest-bearing loans and borrowings
less cash and short-term deposits
n/a n/a
New order intake (note A13) Provides visibility of future revenue No direct equivalent. Calculated as net
awards and net variation orders
n/a n/a
Reported earnings before interest, tax,
depreciation and amortisation (EBITDA)
(note A14)
Measures operating profitability Operating profit/(loss) Excludes impairment of non-financial assets,
depreciation, amortisation and includesshare of
net profits from associates and joint ventures
The intention of this measure is to
provide users of the consolidated
financial statements with a clear and
consistent presentation of operating
performance
Reported earnings before interest and
tax (EBIT) (note A15)
Measures operating profitability Operating profit/(loss) Includes share of net profits from associates and
joint ventures
The intention of this measure is to
provide users of the consolidated
financial statements with a clear and
consistent presentation of operating
performance
236
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Appendices
A1. Business performance net profit attributable to Petrofac Limited shareholders
2022
US$m
2021
restated
(1)
US$m
Reported net loss (A) (337) (242)
Adjustments – separately disclosed items (note 6):
Impairment of assets (net) (5) 35
Fair value remeasurements (10) 8
Cloud ERP implementation costs 10 12
Group reorganisation and redundancy costs 4 2
UK Serious Fraud Office proceedings – 106
Other separately disclosed items 8 14
Operating loss separately disclosed items (B1) 7 177
Finance expense separately disclosed items (B2) 18 28
Tax charge on separately disclosed items 1 –
Deferred tax impairment – 43
Tax charge on separately disclosed items (B3) 1 43
Post-tax separately disclosed items (C = B1 + B2 + B3) 26 248
Group’s business performance net (loss)/profit (D = (A + C)) (311) 6
Loss/(gain) attributable to non-controlling interest 27 (3)
Business performance net (loss)/profit attributable
to Petrofac Limited shareholders (284) 3
(1) The prior year numbers are restated; see note 2.9.
A2. Business performance basic earnings per share attributable to Petrofac Limited
shareholders
2022
US$m
2021
restated
(3)
US$m
Reported net loss attributable to Petrofac Limited shareholders (E) (310) (245)
Add: post-tax separately disclosed items (appendix A, note A1) 26 248
Business performance net loss attributable to Petrofac Limited shareholders (E1) (284) 3
2022
Shares
million
2021
Shares
million
Weighted average number of ordinary shares for basic earnings per share
(1)
(F)
(note 9) 515 362
Weighted average number of ordinary shares for diluted earnings per share
(2)
(F1)
(note 9) 515 362
2022
US cents
2021
restated
(3)
US cents
Basic (loss)/earnings per share
Business performance (E1/F x 100) (55.2) 0.8
Reported (E/F x 100) (60.2) (67.7 )
Diluted (loss)/earnings per share
Business performance (E1/F1 x 100) (55.2) 0.8
Reported (E/F1 x 100) (60.2) ( 67.7 )
(1) The weighted number of ordinary shares in issue during the year, excluding those held by the Employee Benefit Trust.
(2) For the year ended 31 December 2022 and 2021, potentially issuable ordinary shares under the share-based payment plans are
excluded from both the business performance and reported diluted earnings per ordinary share calculation, as their inclusion would
decrease any loss per ordinary share.
(3) The prior year numbers are restated; see note 2.9.
A3. Business performance EBITDA
2022
US$m
2021
restated
(1)
US$m
Reported operating loss (217) (196)
Adjustments:
Operating loss separately disclosed items (appendix A, note A1) 7 177
Share of net profits from associates and joint ventures (note 16) 5 7
Depreciation (note 12) 74 62
Amortisation, business performance impairment and write-off (notes 5a, 5b
and 5g) 5 6
Business performance EBITDA (126) 56
(1) The prior year numbers are restated; see note 2.9.
A4. Business performance EBIT
2022
US$m
2021
restated
(1)
US$m
Reported operating loss (217) (196)
Adjustments:
Operating loss separately disclosed items (appendix A, note A1) 7 177
Share of net profits from associates and joint ventures (note 16) 5 7
Business performance EBIT (205) (12)
(1) The prior year numbers are restated; see note 2.9.
PETROFAC LIMITED | Annual report and accounts 2022
237
A5. Business performance ETR
2022
US$m
2021
restated
(1)
US$m
Reported income tax expense/(credit) 16 (13)
Less: Tax charge on separately disclosed items (appendix A, note A1) (1) (43)
Business performance income tax expense/(credit) (G) 15 (56)
Group’s business performance net (loss)/profit (appendix A, note A1) (311) 6
Group’s business performance loss before tax (H) (296) (50)
Business performance ETR (G/H x 100) (5.1)% >100%
(1) The prior year numbers are restated; see note 2.9.
A6. Capital expenditure
2022
US$m
2021
restated
(1)
US$m
Net cash flows generated from investing activities (98) (38)
Adjustments:
Contingent consideration paid (2) –
Dividends received from associates and joint ventures 8 8
Receipts from Shanghai Zhenhua Heavy Industries Co Ltd in respect of
JSD6000 vessel 5 –
Receipts from joint operation partners in respect of leases 28 59
Net proceeds from disposal of subsidiaries, including receipt against contingent
consideration 98 9
Proceeds from disposal of property, plant and equipment 1 5
Interest received 6 10
Capital expenditure 46 53
(1) The prior year numbers are restated; see note 2.9.
A7. Free cash flow
2022
US$m
2021
restated
(1)
US$m
Net cash flows used in operating activities (146) (161)
Net cash flows generated from investing activities 98 38
Interest paid (86) (36)
Separately disclosed items – refinancing-related costs – (23)
Repayment of lease liabilities (54) (99)
Free cash flow (188) (281)
(1) The prior year numbers are restated; see note 2.9.
A8. Working capital
2022
US$m
2021
(restated)
(2)
US$m
Inventories (note 18) 17 23
Trade and other receivables (note 19) 739 668
Contract assets (note 20) 1,329 1,580
Restricted cash
(1)
(note 17) 111 137
Assets (I) 2 ,196 2,408
Trade and other payables (note 28) 865 1,090
Contract liabilities (note 20) 136 77
Accrued contract expenses (note 32) 759 798
Liabilities (J) 1,760 1,965
Working capital (I – J) 436 443
(1) In the normal course of business, the Group issues guarantees and bonds (via banks and sureties) in respect of contract performance,
advance payments and retentions, and, in certain limited instances, pledges cash collateral (‘restricted cash’) against such
instruments. Therefore, the definition of the Group’s APM for working capital has been amended during the year (and the prior year
comparative restated) to include ‘restricted cash’ (a component of ‘other financial assets’) as this provides useful information to aid the
understanding of the Group’s working capital position.
(2) The prior year numbers are restated; see note 2.9.
238
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Appendices continued
A9. Return on capital employed
2022
US$m
2021
(restated)
(1)
US$m
Reported operating loss (217) (196)
Adjustments:
Operating loss separately disclosed items (appendix A, note A1) 7 177
Share of profits from associates and joint ventures (note 16) 5 7
Amortisation (notes 5a and 5b) 5 6
Business performance EBITA (K) (200) (6)
Total assets opening balance 3,807 4,159
Less: Joint operation partners share of leases in respect of right-of-use assets
relating to Block PM304 in Malaysia (127) (177)
Adjusted total assets opening balance (L) 3,680 3,982
Total assets closing balance 3,267 3,807
Less: Joint operation partners share of leases in respect of right-of-use assets
relating to Block PM304 in Malaysia (note A11) (94) (127)
Adjusted total assets closing balance (M) 3,173 3,680
Average total assets (N = (L + M)/2) 3,427 3,831
Current liabilities opening balance 3,017 3,336
Less: Joint operation partners’ share of leases in respect of right-of-use assets
relating to Block PM304 in Malaysia (note A11) (34) (97)
Adjusted current liabilities opening balance (O) 2,983 3,239
Current liabilities closing balance 2,846 3,017
Less: Joint operation partners’ share of leases in respect of right-of-use assets
relating to Block PM304 in Malaysia (note A11) (34) (34)
Adjusted current liabilities closing balance (P) 2,812 2,983
Average current liabilities (Q = (O + P)/2) 2,898 3,111
Capital employed (R = N – Q) 529 720
Return on capital employed (K/R x 100) (37.8%) (0.8)%
(1) The prior year numbers are restated; see note 2.9.
A10. Cash conversion
2022
US$m
2021
(restated)
(1)
US$m
Cash generated/(used in) from operations (S) 21 (91)
Business performance EBITDA (T) (126) 56
Cash conversion (S/T x 100) <0.0% <0.0%
(1) The prior year numbers are restated; see note 2.9.
A11. Net lease liabilities
2022
US$m
2021
US$m
Non-current lease liabilities (note 17) 144 190
Current lease liabilities (note 17) 66 61
Total lease liabilities 210 251
Non-current receivable from joint operation partners for leases relating to Block
PM304 in Malaysia (note 17) 60 93
Current receivable from joint operation partners for leases relating to Block
PM304 in Malaysia (note 17) 34 34
Total receivable from joint operation partners for leases relating to Block PM304
in Malaysia 94 127
Net non-current lease liabilities 84 97
Net current lease liabilities 32 27
Net lease liabilities 116 124
A12. Net debt
2022
US$m
2021
US$m
Interest-bearing loans and borrowings (U) (note 26) 799 764
Less: Cash and short-term deposits (V) (note 21) (450) (620)
Net debt (U – V) 349 144
PETROFAC LIMITED | Annual report and accounts 2022
239
A13. New order intake
2022
US$m
2021
US$m
Engineering & Construction operating segment
Net awards 281 857
Net variation orders 269 350
550 1,207
Asset Solutions operating segment
Net awards 1,312 993
Net variation orders 65 39
1,377 1,032
New order intake 1,927 2,239
A14. Reported EBITDA
2022
US$m
2021
(restated)
(1)
US$m
Reported operating loss (217) (196)
Adjustments:
Net impairment of non-financial assets classified as separately disclosed items
(notes 12 and 15) (5) 35
Share of net profits from associates and joint ventures (note 16) 5 7
Depreciation (note 12) 74 62
Amortisation, business performance impairment and write-off (notes 5a, 5b
and 5g) 5 6
Reported EBITDA (138) (86)
(1) The prior year numbers are restated; see note 2.9.
A15. Reported EBIT
2022
US$m
2021
(restated)
(1)
US$m
Reported operating loss (217) (196)
Adjustments:
Share of net profits from associates and joint ventures (note 16) 5 7
Reported EBIT (212) (189)
(1) The prior year numbers are restated; see note 2.9.
240
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GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Appendices continued
Pages
Company income statement 242
Company statement of comprehensive income 242
Company balance sheet 243
Company statement of cash flows 244
Company statement of changes in equity 245
Notes to the Company financial statements 246
Note 1 Corporate information 246
Note 2 Summary of significant accounting policies 246
Note 3 Other non-recurring costs 252
Note 4 Income 252
Note 5 General and administration expenses 252
Note 6 Expected credit loss allowance (ECL) 252
Note 7 Other operating income 252
Note 8 Other operating expenses 252
Note 9 Finance income/(expense) 253
Note 10 Dividends paid and proposed 253
Note 11 Investments in subsidiaries 253
Note 12 Property, plant and equipment 253
Note 13 Amounts due from/due to Group entities 254
Note 14 Cash and short-term deposits 255
Note 15 Employee Benefit Trust (EBT) shares 255
Note 16 Share-based payments reserve 255
Note 17 Interest-bearing loans and borrowings 256
Note 18 Financial assets and financial liabilities 257
Note 19 Trade and other payables 259
Note 20 Leases 259
Note 21 Commitments and contingent liabilities 259
Note 22 Risk management and financial instruments 259
Note 23 Related party transactions 261
Note 24 Share capital and related reserves 262
Glossary 263
Shareholder information 265
Company financial statements
241
PETROFAC LIMITED | Annual report and accounts 2022
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Notes
2022
US$m
2021
US$m
Income 4 60 128
General and administration expenses
5 (18) (16)
Other non-recurring costs
3 (6) (116)
Expected credit loss allowance
6 (7) (13)
Other operating income
7 49 8
Other operating expenses
8 (4) (6)
Operating profit/(loss) 74 (15)
Finance income
9 79 34
Finance expense
9 (127) (65)
Profit/(loss) before tax and net loss 26 (46)
2022
US$m
2021
US$m
Net profit/(loss) 26 (46)
Fair value gain on interest rate derivatives 1 –
Total comprehensive profit/(loss) 27 (46)
Company income statement
For the year ended 31 December 2022
Company statement of comprehensive income
For the year ended 31 December 2022
PETROFAC LIMITED | Annual report and accounts 2022242
Notes
2022
US$m
2021
(restated)
(1)
US$m
1 Jan 2021
(restated)
(1)
US$m
Assets
Non-current assets
Investments in subsidiaries 11 278 240 240
Investments in associates 7 7 7
Property, plant and equipment 12 16 16 –
Amounts due from Group entities 13 1,580 1,372 1,021
Other financial assets 18 6 61 48
1,887 1,696 1,316
Current assets
Trade and other receivables 3 1 1
Amounts due from Group entities 13 95 8 6
Other financial assets 18 48 55 7
Cash and short-term deposits 14 99 135 87
245 199 101
Total assets 2,132 1,895 1,417
Equity and liabilities
Equity attributable to Petrofac Limited
shareholders
Share capital 24 10 10 7
Share premium 24 251 251 4
Capital redemption reserve 24 11 11 11
Employee Benefit Trust shares 15 (56) (69) (88)
Share-based payments reserve 16 53 59 72
Unrealised gains on derivatives 1 – –
Retained earnings 237 212 259
Total equity 507 474 265
Notes
2022
US$m
2021
(restated)
(1)
US$m
1 Jan 2021
(restated)
(1)
US$m
Non-current liabilities
Interest-bearing loans and borrowings 17 – – 50
Other financial liabilities 18 17 17 –
17 17 50
Current liabilities
Trade and other payables 19 11 116 1
Amounts due to Group entities 13 753 507 369
Interest-bearing loans and borrowings 17 799 764 705
Other financial liabilities 18 45 17 27
1,608 1,404 1,102
Total liabilities 1,625 1,421 1,152
Total equity and liabilities 2,132 1,895 1,417
The financial statements on pages 242 to 262 were approved by the Board of Directors on 27April
2023 and signed on its behalf by Afonso Reis e Sousa – Chief Financial Officer.
(1) The prior year numbers are restated in relation to the correction of investments in subsidiaries and the classification of amounts due
from Group entities (see note 2) and the classification of interest-bearing loans and borrowings (see note 17).
Company balance sheet
At 31 December 2022
243
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
PETROFAC LIMITED | Annual report and accounts 2022
Notes
2022
US$m
2021
(restated)
(1)
US$m
Operating activities
Profit/(loss) before tax 26 (46)
Adjustments to reconcile profit before tax:
Expected credit loss allowance 6 7 13
Net finance expense 9 48 31
Gain from waiver of loan from subsidiary 7 (45) –
Other non-recurring expenses 3 6 116
Net other non-cash items 7 (2)
49 112
Working capital movements:
Amounts due from Group entities (37) (3)
Net derivative contracts – designated and undesignated (5) (2)
Trade and other receivables (1) –
Trade and other payables (3) 2
Amounts due to Group entities (17) (5)
Net working capital movements (63) (8)
Cash (used in)/generated from operations (14) 104
UK Serious Fraud Office penalty 3 (104) –
Net cash flows (used in)/generated from operating
activities (118) 104
Investing activities
Settlement of deferred consideration receivable from
Ithaca Energy UK Ltd 18 52 –
Movement in restricted cash 18 15 (61)
Loans provided to Group entities 13 (623) (621)
Notes
2022
US$m
2021
(restated)
(1)
US$m
Repayments received on loans provided to Group entities 13 437 232
Settlement of derivative contracts in respect of loans
provided to Group entities 18 14 (2)
Interest received 75 29
Net cash flows used in investing activities (30) (423)
Financing activities
Issue of shares net of associated transaction costs 24 – 250
Loans received from Group entities 13 614 419
Repayment of loans received from Group entities 13 (455) (267)
Proceeds from interest-bearing loans and borrowings, net
of debt acquisition cost 17 62 1,484
Repayment of interest-bearing loans and borrowings 17 (36) (1,470)
Settlement of derivative contracts in respect of loans
received from Group entities 18 28 (3)
Interest paid 9 (95) (21)
Refinancing-related costs paid 9 – (23)
Purchase of Company’s shares by Employee Benefit Trust 15 – (2)
Net cash flows generated from financing activities 118 367
Net (decrease)/increase in cash and cash
equivalents (30) 48
Net foreign exchange difference (6) –
Cash and cash equivalents at 1 January 135 87
Cash and cash equivalents at 31 December 14 99 135
(1) The prior year numbers are restated to reclassify certain cash flows between operating, investing and financing activities; see note 2.
Company statement of cash flows
For the year ended 31 December 2022
PETROFAC LIMITED | Annual report and accounts 2022244
Issued
share
capital
US$m
(note 25)
Share premium
US$m
Capital
redemption
reserve
US$m
Employee
Benefit Trust
shares
(1)
US$m
(note 15)
Share-based
payments
reserve
US$m
(note 16)
Unrealised
gains on
derivatives
US$m
Retained
earnings
US$m
Total
equity
US$m
Balance at 1 January 2021 (as reported) 7 4 11 (88) 72 – 237 243
Impact of restatement (note 2) – – – – – – 22 22
Balance at 1 January 2021 (restated)
(2)
7 4 11 (88) 72 – 259 265
Net loss and total comprehensive loss – – – – – – (46) (46)
Issue of own shares (note 24) 3 247 – – – – – 250
Purchase of Company’s shares by Employee Benefit Trust – – – (2) – – – (2)
Issue of Company’s shares by Employee Benefit Trust – – – 21 (20) – (1) –
Credit to equity for share-based payments charge invoiced to Group entities – – – – 7 – – 7
Balance at 31 December 2021 and 1 January 2022 (restated)
(2)
10 251 11 (69) 59 – 212 474
Net profit – – – – – – 26 26
Other comprehensive income – – – – – 1 – 1
Total comprehensive income – – – – – 1 26 27
Issue of Company’s shares by Employee Benefit Trust – – – 13 (12) – (1) –
Credit to equity for share-based payments – – – – 6 – – 6
Balance at 31 December 2022 10 251 11 (56) 53 1 237 507
(1) Shares held by Petrofac Employee Benefit Trust.
(2) The prior year numbers are restated in relation to the correction of investments in subsidiaries; see note 2.
Company statement of changes in equity
For the year ended 31 December 2022
245
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
PETROFAC LIMITED | Annual report and accounts 2022
1 Corporate information
Petrofac Limited (the Company) is a limited liability company registered and domiciled in Jersey
under the Companies (Jersey) Law 1991 and is the holding company for the international group of
Petrofac subsidiaries. Petrofac Limited and its subsidiaries at 31 December 2022 comprise the
Petrofac Group (the Group). The Group’s principal activity is to design, build, manage and maintain
infrastructure for the energy industries.
The financial statements of the Company for the year ended 31 December 2022 were authorised for
issue in accordance with a resolution of the Board of Directors on 27 April 2023.
2 Summary of significant accounting policies
Basis of preparation
The separate financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and
applicable requirements of Jersey law.
The separate financial statements of the Company have been prepared on a historical cost basis,
except for derivative financial instruments that have been measured at fair value. The functional and
presentation currency of these separate financial statements is United States dollars and all values
in the separate financial statements are rounded tothe nearest million (US$m) unless
otherwisestated.
Adoption of new financial reporting standards, amendments and interpretations
Effective new financial reporting amendments
The Company applied for the first time certain amendments, which are effective for annual periods
beginning on or after 1 January 2022. The Company has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet effective.
The following amendments apply for the first time in 2022, but do not have an impact on the
Company financial statements:
• Onerous Contracts – Costs of Fulfilling a Contract (Amendments to IAS 37)
• Property, Plant and Equipment: Proceeds before intended use – Amendments to IAS 16
• Reference to the Conceptual Framework – Amendments to IFRS 3
• Annual Improvements to IFRS Standards 2018–2020
Financial reporting standards, amendments and interpretations issued but not yet
effective
Certain new financial reporting standards, amendments and interpretations have been published
that are not mandatory forthe 31 December 2022 reporting period and have not been early
adopted by the Company.
Significant accounting policies
Investments in subsidiaries
Investment in subsidiaries are stated at cost less any accumulated impairment.
At each reporting date, the Company reviews the carrying amounts of its investments in subsidiaries
to assess whether there is an indication that those assets may be impaired. If any such indication
exists, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable
amount is the higher of its fair value less costs of disposal and its value in use. In assessing value in
use, the estimated future cash flows attributable to the asset are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset. Fair value less costs of disposal is based on the risk-adjusted
discounted cash flow models. A post-tax discount rate is used in such calculations.
If the recoverable amount of an asset is estimated to be less than its carrying amount an impairment
charge is recognised immediately in the Company income statement.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to
the revised estimate of its recoverable amount, but not exceeding the carrying amount that would
have been determined had no impairment loss been recognised for the asset in prior reporting
periods. A reversal of an impairment loss is recognised immediately in the Company
incomestatement.
Investments in associates
Investments in associates are stated at cost less any accumulated impairment.
At each reporting date, the Company reviews the carrying amounts of its investments in associates
to assess whether there is an indication that those assets may be impaired. If any such indication
exists, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable
amount is the higher of its fair value less costs of disposal and its value in use. In assessing value in
use, the estimated future cash flows attributable to the asset are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset. Fair value less costs of disposal is based on the risk-adjusted
discounted cash flow models. A post-tax discount rate is used in such calculations.
If the recoverable amount of an asset is estimated to be less than its carrying amount an impairment
charge is recognised immediately in the Company income statement.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to
the revised estimate of its recoverable amount, but not exceeding the carrying amount that would
have been determined had no impairment loss been recognised for the asset in prior reporting
periods. A reversal of an impairment loss is recognised immediately in the income statement.
Notes to the Company financial statements
For the year ended 31 December 2022
PETROFAC LIMITED | Annual report and accounts 2022246
Financial assets
Initial recognition and measurement
Financial assets are classified at initial recognition, as subsequently measured at amortised cost,
fair value through other comprehensive income, and fair value through profit or loss.
The Company initially measures a financial asset at its fair value plus, in the case of a financial asset
not at fair value through profit or loss, transaction costs.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified into the following
categories:
• Amortised cost
• Fair value through profit or loss
Amortised cost
The Company generally applies this category to trade and other receivables, amounts due from
Group entities and deferred consideration receivable. The Company measures financial assets at
amortised cost if both of the following conditions aremet:
• The financial asset is held within a business model with the objective to hold financial assets in
order to collect contractual cash flows, and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR)
method and are subject to impairment. Gains and losses are recognised in the Company’s income
statement when the asset is derecognised, modified or impaired.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and
financial assets designated upon initial recognition at fair value through profit or loss, or financial
assets mandatorily required to be measured at fair value. Derivatives are classified as held for
trading unless they are designated as effective hedging instruments. Financial assets at fair value
through profit or loss are carried in the Company’s balance sheet at fair value with net changes in
fair value recognised in the income statement.
The fair value changes to undesignated derivative contracts are recognised within the other
operating income or expenses line item in the Company’s income statement.
The fair value of commodity swap contracts is based on the forward Brent curve. All of these
derivative contracts have back-to-back contracts with the Group entity on behalf of whom the
external derivative contract was entered into by the Company. The Company recognises the
derivative asset or liability in relation to a derivative contract with the external counterparty and
presents the back-to-back contract with the Group entity within other financial assets or liabilities
and amounts due to or from Group entities in the Company balance sheet.
Impairment of financial assets
The Company recognises an allowance for expected credit losses (ECLs) for all financial assets not
held at fair value through profit or loss. ECLs are based on the difference between the contractual
cash flows due in accordance with the contract and all the cash flows that the Company expects to
receive, discounted at an approximation of the original effective interest rate. The expected cash
flows will include, if any, cash flows from the sale of collateral held or other credit enhancements
that are integral to the contractual terms.
For financial assets measured at amortised cost, ECLs are recognised in two stages. For credit
exposures for which there has not been a significant increase in credit risk since initial recognition,
ECLs are provided for credit losses that result from default events that are possible within the next
12 months (a 12-month ECL). For those credit exposures for which there has been a significant
increase in credit risk since initial recognition, aloss allowance is required for credit losses expected
over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
The Company considers a financial asset to be in default when available information indicates that
the Company is unlikely to receive the outstanding contractual amounts in full.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as interest-bearing loans and borrowings,
trade and other payables, or derivative financial instruments.
All financial liabilities are recognised initially at fair value and, in the case of interest-bearing loans
and borrowings and trade and other payables, net of directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables, loans and borrowings including
bank overdrafts, derivative financial instruments, and amounts due to Group entities.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities are classified in the following
categories:
• Financial liabilities at fair value through profit or loss
• Loans and borrowings
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at fair value through profit or loss.
247
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
PETROFAC LIMITED | Annual report and accounts 2022
Notes to the Company financial statements continued
For the year ended 31 December 2022
Financial liabilities include derivative financial instruments entered into by the Company that are not
designated as hedging instruments in hedge relationships.
Gains or losses on liabilities held for trading are recognised in the income statement.
Loans and borrowings
This category generally applies to interest-bearing loans and borrowings (note 18). After initial
recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost
using the effective interest rate (EIR) method. The EIR amortisation is included as finance expense in
the Company income statement.
Amortised cost is calculated by considering any discount or premium on acquisition and fees or
costs that are an integral part of the EIR.
Leases
The Company assesses at contract inception whether a contract is, or contains, a lease; that is, if
the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.
Company as a lessee
Right-of-use assets
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments
made at or before the commencement date less any lease incentives received.
At each reporting date, the Company reviews the carrying amounts of its right-of-use assets to
assess whether there is an indication that those assets may be impaired. If any such indication
exists, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable
amount is the higher of its fair value less costs of disposal and its value in use. In assessing value in
use, the estimated future cash flows attributable to the asset are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset. Fair value less costs of disposal is based on the risk-adjusted
discounted cash flow models. A post-tax discount rate is used in such calculations.
If the recoverable amount of an asset is estimated to be less than its carrying amount an impairment
charge is recognised immediately in the Company income statement.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to
the revised estimate of its recoverable amount, but not exceeding the carrying amount that would
have been determined had no impairment loss been recognised for the asset in prior reporting
periods. A reversal of an impairment loss is recognised immediately in the Company income
statement.
Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the
present value of lease payments to be made over the lease term.
The Company recognises a lease liability for an obligation to acquire a mobile offshore production
unit (MOPU) at the end of the lease term for an amount specified in the lease contract. Accordingly,
the Company recognises a lease liability equal to the future payment to acquire the unit, discounted
at the incremental borrowing rate. The incremental borrowing rate is defined as the rate of interest
that a lessee would have to pay to borrow over a similar term and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use asset, in a similar environment, at
the lease commencement date.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of
interest due and reduced for lease payments made. In addition, the carrying amount of lease
liabilities is remeasured if there is a modification, a change in the lease term, a change in the
in-substance fixed lease payments ora change in the assessment to purchase the underlying asset.
The Company’s lease liabilities are included within the ‘other financial liabilities’ line item of the
Company balance sheet (note 20).
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its leases of property, plant
and equipment that have a lease term of 12 months or less. It also applies the lease of low-value
assets recognition exemption to leases of property, plant and equipment that are considered of low
value (i.e. below US$5,000). Lease payments on short-term leases and leases of low-value assets
are recognised as an expense on a straight-line basis over the lease term in cost of sales or selling,
general and administration expenses line items of the Company income statement.
If the lease contract is cancellable by both lessee and lessor with no or insignificant penalty then the
lease contract is considered to be cancellable and recognised as a short-term lease; refer tonote
29 for amounts recognised in the Company income statement associated with the short-term and
low-value assetleases.
Employee Benefit Trust (EBT) shares
Where the Company purchases its own equity instruments, for example as the result of a share buy-
back or a share-based payment plan, the consideration paid, including any directly attributable
incremental costs, is deducted from equity attributable to the owners of the Company as EBT
shares, until the shares are cancelled or reissued. EBT shares are treasury shares administered by
the Employee Benefit Trust. The shares are either acquired on market or issued by the Company at
the grant date and are held as EBT shares until such time as they vest.
Share-based payments
Certain employees of Group entities receive remuneration in theform of share-based payments,
whereby employees render services in exchange for Company shares or rights over shares
(‘equity-settled transactions’); see note 24 of the Group’s consolidated financial statements. The
PETROFAC LIMITED | Annual report and accounts 2022248
Company has no employees and thus there is no charge in the Company income statement for
share-based payments. The charge for share-based payments has been recognised as an increase
in amounts due from Group entities in the Company balance sheet.
Taxation
Profits arising in the Company for the 2022 year of assessment will be subject to Jersey tax at the
standard corporate income tax rate of 0% (2021: 0%).
Significant accounting judgements and estimates
Judgements
In the process of applying the Company’s accounting policies, management has made the following
judgements, apart from those involving estimations, which have the most significant effect on the
amounts recognised in the financial statements:
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the
end of the reporting period that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities withinthe next financial year are discussed below:
• ECL allowance on amounts due from Group entities: the Company recognises an allowance for
ECLs for amounts due from Group entities based on the difference between the contractual cash
flows due in accordance with the contract and all the cash flows that the Company expects to
receive. The expected cash flows will include, if any, cash flows from the sale of collateral held or
other credit enhancements that are integral to the contractual terms. In estimating contractual
cash flows, the Company takes into account the probability of default of counterparties and the
loss given default. The carrying value of amounts due from Group entities was US$1,708m (2021:
US$1,380m) and an ECL allowance of US$135m was recognised as at 31 December 2022 (2021:
US$76m). A 1%-2% increase in the probability of default would result in an additional ECL
allowance of US$4m-US$11m.
• The Revolving Credit Facility (RCF) embedded derivative: the terms of the RCF provides for the
Company to pay a certain proportion of losses incurred by an original lender to facilitate any
transfer of its commitment under the facility to another lender. This has been classified as an
embedded derivative on initial recognition and subsequently remeasured at fair value through
profit or loss. The fair value of the embedded derivative as at 31 December 2022 was estimated
at US$22m (2021: US$4m) (Level 2 of the ‘fair value hierarchy’ contained within IFRS 13 ‘Fair
Value Measurement’) resulting in a fair value loss of US$18m (note 9). The fair value of the
embedded derivative is sensitive to market yields of other debt instruments issued by the
Company.
• ECL allowance on purchase of originally credit-impaired financial asset: the Company purchased
an originally credit-impaired loan receivable of US$432m from Petrofac (Malaysia-PM304) Ltd and
recognised the loan receivable at a fair value of US$94m on initial recognition. The loan receivable
was considered credit impaired on purchase as the borrower incurred significant losses which
restricted its ability for repayment. The fair value of the originally credit-impaired loan was
estimated based on future cash flow projections of Petrofac (Malaysia-PM304) Ltd, discounted at
the credit impaired effective interest rate determined at the date of purchase. Management has
assessed that a discount rate of 4.2% is fair market interest rate for a loan with similar terms.
Subsequent to initial recognition, changes in the ECL allowance were recognised based on the
lifetime expected cash flows discounted at the original effective interest rate resulting in an ECL
reversal of US$51m for the year ended 31 December 2022. Future cash flow projections are
based on the approved business plan of Petrofac (Malaysia-PM304) Ltd.
A 10% change in cash flows would result in a US$9m change in the carrying value of the loan
receivable at 31 December 2022 and a 1% change in the original effective interest rate would
result in a US$2m change in the carrying value of the loan receivable at 31 December 2022.
Other estimates
Recoverable amount of investments in subsidiaries: the Company determines at the end of each
reporting period whether there is any evidence of indicators of impairment in the carrying amount of
its investments in subsidiaries. Where indicators exist, an impairment test is undertaken which
requires management to estimate the recoverable amount of its assets, which is based on value-in-
use. The value-in-use estimation is based on the output of management’s business planning
process which involves assumptions relating to, but not limited to, future cash flows, discount rate
and inflation. The calculations use future cash flow projections based on approved business plans
for three years. Cash flows beyond the three year period are extrapolated using an estimated
growth rate of 4% (2021: 5%) for investments in subsidiaries whose operations include contracts
which are primarily reimbursable engineering and production services contracts, and no growth rate
applied for cash flows in other subsidiaries. The Company determined a pre-tax discount rate of
16.0% as at 31 December 2022 (2021: 15.2%) based on the Company’s weighted average cost of
capital (WACC). The carrying amount of investments in subsidiaries was US$278m (2021:
US$240m). The carrying value is not sensitive to changes in key assumptions and management
does not consider that any reasonable possible change in any single assumption would give rise to
an impairment of the carrying value of investment in subsidiaries.
249
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
PETROFAC LIMITED | Annual report and accounts 2022
Notes to the Company financial statements continued
For the year ended 31 December 2022
Prior year adjustments
1. During 2022, the Company identified an error within ‘investments in subsidiaries’ associated with
the internal Group disposal of the Company’s investment in Petrofac Inc to Petrofac UK Holdings
Limited, which took place in late 2020. This transaction was incorrectly omitted from the
Company’s financial statements in 2020 and 2021.
On 10 December 2020, 100% of the issued and outstanding share capital of Petrofac Inc was
sold to the Company’s direct subsidiary, Petrofac UK Holdings Limited, in consideration for 1,000
new ordinary shares of Petrofac UK Holdings Limited. The fair value of the consideration received
was determined to be US$22m (based on the fair value of Petrofac Inc and its subsidiaries at the
date of disposal). The carrying value of the investment in Petrofac Inc at the date of disposal was
US$nil. Management identified that the carrying value was understated at that date, primarily
driven by an intercompany receivable recognised amounting to US$20m.
The Company has assessed the impact of this transaction on the Company’s financial statements
and recognised a reversal of impairment of investment in Petrofac Inc of US$22m (US$20m in
respect of periods prior to 31 December 2019 and US$2m in respect of 2020 before the disposal
of the investment in Petrofac Inc). This has been recognised as an increase in investment in
subsidiaries with a corresponding increase in opening retained earnings as at 1 January 2021.
The Company has restated the comparative figures included in these financial statements in
accordance with IAS 8.
As a result of the disposal of Petrofac Inc to Petrofac UK Holdings Limited, the investment in
Petrofac Inc of US$22m was derecognised and an additional investment in Petrofac UK Holdings
Limited of the same amount was recognised at the date of sale. As the error related to periods
prior to 31 December 2020, this restatement has affected the balance sheet and brought forward
retained earnings, as shown below.
2. The Company has reviewed its amounts due from Group entities balances and identified that
certain balances relating to loans provided to Group entities are non-current in nature and
accordingly, reclassified balances of US$1,372m and US$1,021m into non-current assets as at
31 December 2021 and 31 December 2020, respectively.
The impact of these restatements on the financial statements as at 31 December 2021 is
presentedbelow:
31 Dec 2021
As reported
US$m
Restatement
1
US$m
Restatement
2
US$m
31 Dec 2021
Restated
US$m
Assets
Non-current assets
Investments in subsidiaries 218 22 – 240
Amounts due from Group entities – – 1,372 1,372
Total non-current assets 302 22 1,372 1,696
Current assets
Amounts due from Group entities 1,380 – (1,372) 8
Total current assets 1,571 – (1,372) 199
Total assets 1,873 22 – 1,895
Equity and liabilities
Retained earnings 190 22 – 212
Total equity 452 22 – 474
Total equity and liabilities 1,873 22 – 1,895
In accordance with IAS 1 ‘Presentation ofFinancial Statements’, a balance sheet as at the beginning
ofthepreceding year (i.e. at 1 January 2021) has also been restated and presented.
The impact of these restatements on the financial statements as at 1 January 2021 is presented
below:
1 Jan 2021
As reported
US$m
Restatement
1
US$m
Restatement
2
US$m
1 Jan 2021
Restated
US$m
Assets
Non-current assets
Investments in subsidiaries 218 22 – 240
Amounts due from Group entities – – 1,021 1,021
Total non-current assets 273 22 1,021 1,316
Current assets
Amounts due from Group entities 1,027 – (1,021) 6
Total current assets 1,122 – (1,021) 101
Total assets 1,395 22 – 1,417
Equity and liabilities
Retained earnings 237 22 – 259
Total equity 243 22 – 265
Total equity and liabilities 1,395 22 – 1,417
Additionally, during the year, the FRC’s Corporate Reporting Review Team (CRRT) reviewed the
Group’s 2021 Annual report and accounts. Following this review, the Company revisited the
presentation of certain items in the Company’s statement of cash flows and as a result, has
reclassified the following balances:
1. Cash flows arising from movements in restricted cash balances of US$61m were presented as
working capital adjustments related to ‘other financial assets and liabilities’ within cash flows
generated from operating activities. Upon review, the Company has concluded that in
PETROFAC LIMITED | Annual report and accounts 2022250
accordance with IAS 7, these balances are ‘other investments that are not cash and cash
equivalents’, and hence they have been reclassified as cash flows generated from investing
activities.
2. Cash flows arising from amounts due from Group entities of US$335m and amounts due to
Group entities of US$132m were presented as working capital adjustments within cash flows
generated from operating activities. Upon review, the Company has concluded that in
accordance with IAS 7, these cash flows meet the definition of cash flows generated from
investing and financing activities respectively and have therefore been reclassified as follows:
• US$360m reclassified as investing activities, consisting of cash outflows of US$621m related to
loans provided to Group entities less cash inflows of US$232m related to principal repayments
received on such loans and US$29m of interest received from such loans.
• US$151m reclassified as financing activities consisting of cash inflows of US$419m related to
loans received from Group entities less cash outflows of US$267m repayment of loans received
from Group entities and US$1m payment of interest on such loans.
• US$6m net other non-cash items consisting of foreign exchange losses of US$2m on loans
provided to Group entities and US$4m of loans received from Group entities (and adjusted in
the reconciliation of loss before tax to cash generated from operations).
Cash flows arising from amounts due from Group entities of US$335m includes cash inflows of
US$23m with respect to loans received from Group entities.
Amounts due from and due to Group entities relating to general and administrative expense
recharges of US$3m and US$5m respectively continue to be classified as operating activities in
the Company’s statement of cash flows.
3.
Derivative contracts entered into by the Company in order to reduce foreign currency risk
exposure on the balance sheet position of the Company in respect of amounts due from and
due to Group entities and other payables, denominated in various currencies. These
derivatives are not designated as hedging instruments. Movements relating to these balances
of US$11m were presented as cash flows generated from operating activities. In accordance
with IAS 7, undesignated derivative contracts should be presented in the most appropriate
manner for the business. Therefore, upon review, the Company has classified these
movements in the same manner as the underlying transaction; derivative contracts placed to
reduce foreign currency risk exposure on loans provided to Group entities of US$2m have
been reclassified as cash flows generated from investing activities and derivative contracts
placed to reduce foreign currency risk exposure on loans and deposits received from Group
entities of US$3m have been reclassified as cash flows generated from financing activities.
Movements in derivative contracts placed to reduce foreign currency risk exposure on other
payables and on contracts entered into on behalf of Group entities of US$2m continue to be
classified as operating activities in the Company’s statement of cash flows
.
The impact of the restatement on the Company’s statement of cash flows for 2021 is as follows:
2021
As reported
US$m
Restatement
1
US$m
Restatement
2
US$m
Restatement
3
US$m
2021
Restated
US$m
Net other non-cash items (2) – 6 (6) (2)
Working capital adjustments:
Amounts due from Group entities (338) – 335 – (3)
Other financial assets and liabilities (74) 61 – 13 –
Net derivative contracts – – – (2) (2)
Amounts due to Group entities 127 – (132) – (5)
Net working capital adjustments (283) 61 203 11 (8)
Cash (used in)/generated from
operations (171) 61 209 5 104
Net cash flows (used in)/generated
from operating activities (171) 61 209 5 104
Movement in restricted cash – (61) – – (61)
Loans provided to Group entities – – (621) – (621)
Repayments received on loans provided
to Group entities – – 232 – 232
Settlement of derivative contracts in relation
to loans provided to Group entities – – – (2) (2)
Interest received – – 29 – 29
Net cash flows used in investing
activities – (61) (360) (2) (423)
Loans received from Group entities – – 419 – 419
Repayment of loans received from Group
entities – – (267) – (267)
Settlement of derivative contracts in relation
to loans received from Group entities – – – (3) (3)
Interest paid (20) – (1) – (21)
Net cash flows generated from
financing activities 219 – 151 (3) 367
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
PETROFAC LIMITED | Annual report and accounts 2022
Notes to the Company financial statements continued
For the year ended 31 December 2022
251
The FRC has confirmed that the matter is now closed. The Group recognises that the FRC’s
review was based on the Group’s Annual report and accounts for the year ended 31 December
2021 and did not benefit from detailed knowledge of the Company’s business or an
understanding of the underlying transactions entered into. The FRC’s role is not to verify the
information provided but to consider compliance with reporting requirements. Therefore, given
the scope and inherent limitations of their review, it would not be appropriate for the Company
or any third party, including but not limited to investors and shareholders, to infer any
assurance from the FRC’s review that the Company’s 2021 Annual report and accounts was
correct in all material respects.
3 Other non-recurring costs
2022
US$m
2021
US$m
Loss on sale of deferred consideration receivable 3 –
Legal and professional fees in respect of the SFO proceedings 3 10
UK Serious Fraud Office proceedings – 106
Company income statement charge 6 116
During 2022, the Company sold the remaining deferred consideration receivable from Ithaca Energy
UK Ltd with a carrying value of US$43m, for US$40m, resulting in a loss of US$3m (note 18).
In the prior year, following the UK Serious Fraud Office (SFO) investigation launched in 2017, the
Company reached a plea agreement with the SFO in September 2021. As a result, on 4 October
2021 the Southwark Crown Court ordered the Company to pay a penalty and costs of £77m and all
amounts were paid during 2022 (US$104m).
Additionally in 2022, the Company incurred a further US$3m of professional services fees related to
the SFO proceedings during the year (2021: US$10m).
4 Income
Dividends from subsidiaries and associates are recognised when the right to receive payment
isestablished.
2022
US$m
2021
US$m
Dividend income from subsidiaries 50 120
Dividend income from associates 10 8
60 128
5 General and administration expenses
General and administration expenses relate to costs directly incurred by the Company and also the
recharged portion of corporate personnel costs, travelling, entertainment and professional costs
incurred by one of its subsidiaries but relating to the Company, of US$17m (2021: US$14m).
Included in general and administration expenses is the auditor’s remuneration of US$47,000
(2021:US$41,000) related to the fee for the audit of the Company’s financial statements.
6 Expected credit loss allowance
The ECL allowance recognised by the Company during 2022 and 2021 was as follows:
2022
US$m
2021
US$m
ECL on amounts due from Group entities (note 13) 59 14
ECL reversal on acquired loan receivable from a subsidiary (note 13) (51) –
ECL reversal on other financial assets (note 18) (1) (1)
7 13
Note 2 includes further details and methods used in estimating any ECL allowance and the
sensitivity of the ECL allowance to a change in the probability of default of its subsidiaries. See note
13 for analysis of ECL allowance on amounts due from Group entities.
7 Other operating income
2022
US$m
2021
US$m
Gain from waiver of loan from subsidiary 45 –
Net gains on derivative contracts 4 –
Recharges to Group entities – 6
Net foreign exchange gains – 2
49 8
During the year, the Company received a loan of US$45m from one of its subsidiaries. In December
2022, the subsidiary waived the repayment of the loan due from the Company, in full. Accordingly,
the Company recognised a gain, resulting from this waiver of the loan.
8 Other operating expenses
2022
US$m
2021
US$m
Net losses on derivative contracts 4 –
Costs incurred on behalf of Group entities – 6
4 6
PETROFAC LIMITED | Annual report and accounts 2022252
9 Finance income/(expense)
2022
US$m
2021
US$m
Finance income
Unwinding of discount on deferred consideration (note 18) – 5
On amounts due from Group entities 79 29
Total finance income 79 34
Finance expense
Borrowings (85) (35)
Lease liabilities – (1)
On amounts due to Group entities (24) (1)
Fair value movement of embedded derivative (18) –
Refinancing-related costs – (28)
Total finance expense (127) (65)
Borrowing costs increased during 2022 following the debt refinancing exercise completed in
October 2021, and the issuance of the senior secured notes at this time (note 17), with a full year of
borrowing costs incurred compared to only two months in the prior year. Additionally, borrowing
costs were adversely impacted by the increase in market interest rates during the year, which
impacted the interest costs in respect of the term loans and revolving credit facility.
The terms of the RCF provide for the Company to pay a certain proportion of losses incurred by an
original lender to facilitate any transfer of its commitment under the facility to another lender. This
has been classified as an embedded derivative on initial recognition and subsequently re-measured
at fair value through profit or loss. The fair value of the embedded derivative as at 31 December
2022 was estimated at US$22m (2021: US$4m) (Level 2 of the ‘fair value hierarchy’ contained within
IFRS 13 ‘Fair Value Measurement’) resulting in a fair value loss of US$18m. The fair value of the
embedded derivative is sensitive to market yields of other debt instruments issued by the Company.
10 Dividends paid and proposed
No dividends were paid or proposed in the year.
11 Investments in subsidiaries
At 31 December, the Company had investments in the following active subsidiaries:
Name of company
Country of
incorporation
Percentage of nominal value ofissued
shares controlled bytheCompany
2022 2021
Trading subsidiaries
Global Mobility Company Pte Limited Singapore 100 100
Jermyn Insurance Company Limited Guernsey 100 100
Petrofac Services Limited England 100 100
Petrofac UK Holdings Limited England 100 100
Petrofac International Limited Jersey 100 100
Petrofac Energy Developments International Limited Jersey 100 100
Petrofac Facilities Management International Limited Jersey 100 100
Petrofac Training International Limited Jersey 100 100
Petroleum Facilities E & C Limited Jersey 100 100
Petrofac South East Asia Pte Limited Singapore 99 99
Petrofac Treasury UK Limited UK 100 100
The movement of investments in subsidiaries during the year was as follows:
2022
US$m
2021
(restated)
(1)
US$m
At 1 January 240 240
Additional investment 38 –
At 31 December 278 240
(1) The prior year numbers are restated in respect of the presentation of movements related to investment in subsidiaries (note 2).
The increase in investment in subsidiaries in the year of US$38m was due to the difference between
the consideration paid for the acquisition of an intercompany loan from one of the Company’s
subsidiaries and the fair value of that loan (notes 6 and 13).
12 Property, plant and equipment
The property, plant and equipment of US$16m (2021: US$16m) is related to the WestDesaru mobile
offshore production unit (MOPU) for which there is a put option on the Company. In 2014, the
Company entered into a sale and purchase agreement (SPA) with the buyer to dispose of 80% of
the shares in PetroFirst Infrastructure Limited (formerly Petrofac FPSO Holdings Limited) that owned
253
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
PETROFAC LIMITED | Annual report and accounts 2022
Notes to the Company financial statements continued
For the year ended 31 December 2022
the floating platform assets. In accordance with the terms of the SPA, the buyer has an option to put
the West Desaru MOPU to the Company; the put option terminates on 31 December 2030.
The lease in respect of the MOPU expires on 30 September 2026. Management expects that the
put option associated with the MOPU (with a value of US$20m) will be payable on the lease expiry
(i.e. on 30 September 2026). Accordingly, the Company has recognised a right-of-use asset and a
corresponding lease liability associated with the MOPU (note 20). There was no movement in the
right-of-use asset during the year.
13 Amounts due from/due to Group entities
Amounts due from/due to Group entities comprise both interest-bearing and non-interest-bearing
short-term loans provided to and received from Group entities, listed in note 34 of the Group’s
consolidated financial statements.
The net increase in current and non-current amounts due from Group entities of US$295m was
mainly due to dividends receivable from subsidiaries of the Company of US$50m, declared in
December 2022 and additional funding provided to certain Group entities from the Company, offset
by an increase in ECL allowance during the year. The increase in amounts due to Group entities of
US$246m primarily relates to amounts advanced to the Company from Petrofac Treasury UK Ltd.
At the end of each reporting period, the amounts due from Group entities are reported net of ECL
allowance in accordance with IFRS 9 ‘Financial Instruments’.
As at 31 December 2022, the Company had the following amounts due from and to Group entities:
Amounts due from Group entities
2022
US$m
2021
(restated)
US$m
Non-current
Loans provided to Group entities 1,697 1,425
Expected credit loss on amounts due from Group entities (117) (53)
1,580 1,372
Current
Loans provided to Group entities 49 9
Trade and other receivables from Group entities 64 22
Expected credit loss on amounts due from Group entities (18) (23)
95 8
Amounts due to Group entities
Current
Borrowings from Group entities 749 489
Derivative contract with the Group entity 3 –
Trade and other payables to Group entities 1 18
753 507
On 1 January 2022, the Company purchased a loan due from Petrofac (Malaysia-PM304) Ltd from its
subsidiary Petrofac International (UAE) LLC, for a consideration of US$132m. The gross amount
receivable from Petrofac (Malaysia-PM304) Ltd under this loan at the date of purchase was US$432m.
The Company determined that the fair value of the loan at the date of purchase was US$94m. The
Company purchased the loan at the book value recognised by its subsidiary at the date purchase. As
a result, the Company has recognised the difference between purchase price and fair value of the loan
acquired as a capital contribution. The fair value of the loan was determined based on future cash flow
projections of Petrofac (Malaysia-PM304) Ltd, discounted at 4.2% which was assessed to be the fair
market interest rate for a loan with similar terms. The difference between the consideration paid and
the fair value of the loan (of US$38m) was recognised as an investment in subsidiary.
As at 31 December 2022, the carrying value of the loan was US$90m. As a result of improvements
in the performance of Petrofac (Malaysia-PM304) Ltd, based on which any ECL is assessed, the
Company recorded a reversal of ECL allowance of US$51m (note 6).
PETROFAC LIMITED | Annual report and accounts 2022254
The movement in this intercompany receivable during the year ended 31 December 2022 was as follows:
2022
US$m
2021
US$m
At 1 January – –
Purchase 94 –
Net cash received during the year (59) –
Interest income 4 –
Reversal of ECL allowance (note 6) 51 –
At 31 December 90 –
The movement in the ECL allowance against amounts due from Group entities was as follows:
2022
US$m
2021
US$m
At 1 January 76 62
ECL allowance (note 6) 59 14
At 31 December 135 76
The movement in ECL allowance in the income statement in relation to a loan receivable from a
subsidiary of US$51m was recognised directly as an adjustment to the carrying amount of the loan.
At 31 December 2022, the analysis of amounts due from Group entities is as follows:
2022
US$m
2021
US$m
ECL rate 7.5% 5.2%
Gross carrying amount 1,810 1,456
Less: ECL allowance (135) (76)
ECL adjusted amounts due from Group entities at 31 December 1,675 1,380
14 Cash and short-term deposits
2022
US$m
2021
US$m
Cash at bank and short-term deposits 99 135
The fair value of cash at bank and short-term deposit balances was US$99m (2021: US$135m). This
balance represents cash and cash equivalents for the purpose of the Company statement of
cashflows.
15 Employee Benefit Trust (EBT) shares
The Petrofac Employee Benefit Trust (the ‘Trust’) has been established to administer the Group’s
discretionary share scheme awards made to the employees of the Group. The Trust issues
Company shares to the Group’s employees on their respective vesting dates subject to satisfying
any service and performance conditions of each scheme. The Trust continues to be included in the
Company’s financial statements.
For the purpose of making awards under the Group’s share-based payment plans, shares in the
Company are purchased and held by the Trust. These shares have been classified in the balance
sheet as EBT shares within equity. Shares vested during the year are satisfied with these shares.
The movements in total EBT shares are shown below:
2022 2021
Number US$m Number US$m
At 1 January 5,232 ,105 69 8,703,208 88
Purchase of Company’s shares by Employee
Benefit Trust
(1)
1,338,610 – 1,206,470 2
Issue of Company’s shares by Employee Benefit
Trust (2,480,037) (13) (4,677,573) (21)
At 31 December 4,090,678 56 5, 232,105 69
(1) All shares purchased via the Open Offer (note 24).
Shares vested during the year include dividend shares of 91,304 shares (2021: 278,089 shares).
16 Share-based payments reserve
The share-based payments reserve is used to recognise the value of equity-settled share-based
payments awarded to employees of the Group entities, and transfers out of this reserve are made
upon vesting of the original share awards.
255
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
PETROFAC LIMITED | Annual report and accounts 2022
Notes to the Company financial statements continued
For the year ended 31 December 2022
17 Interest-bearing loans and borrowings
The Company had the following interest-bearing loans and borrowings outstanding:
2022
US$m
2021
(restated)
(1)
US$m
Non-current
Senior secured notes – –
Revolving credit facility – –
Term loans – –
– –
Current
Senior secured notes 583 580
Revolving credit facility 117 85
Term loans 99 99
799 764
Total interest-bearing loans and borrowings 799 764
(1) As a result of the prior year adjustments included in note 2.9 of the consolidated financial statements, the Company would have required
a waiver in respect of the financial covenants as at 31 December 2021, and therefore has restated the debt facilities as ‘current’ at
that date.
Interest-bearing loans and borrowings as at 31 December 2022 is presented net of debt acquisition
costs of US$25m (2021: US$28m).
Following the capital raise (note 22) and refinancing completed in 2021, the Company successfully
completed an amendment and extension to its existing bank debt facilities in April 2023, with the
RCF and the term loans now maturing in October 2024.
However, as this amendment and extension (including a waiver of the financial covenant testing date
of 31 December 2022) was completed after the year end and therefore the Company did not have
an unconditional right to defer repayment of these facilities for greater than 12 months as at the
balance sheet date, the borrowings have been disclosed as current in the balance sheet.
The Company therefore now has facilities consisting of US$600m of 9.75% senior secured notes
(due 2026), a US$162m revolving credit facility (RCF), a US$45m (denominated as AED167m)
bilateral facility and a US$45m bilateral loan facility. All facilities are for general corporate purposes.
Details of the Company’s interest-bearing loans and borrowings are as follows:
Senior secured notes
In November 2021, the Company issued US$600m of 9.75% senior secured notes, due November
2026. These are listed on the International Stock Exchange and were issued at a 0.97% discount to
the nominal value, resulting in a total 10.0% yield to maturity for the purchasers of the notes. The
notes were issued with a rating of BB- from both S&P and Fitch.
The interest coupon is payable semi-annually in arrears and the Company has a call option to
redeem the notes with a first call date of November 2023, with a make-whole premium of
4.88%/2.44% from November 2023 and 2024 respectively.
Revolving credit facility
The Company had a US$180m committed RCF at 31 December 2022 (2021: US$180m) with a
syndicate of international banks. On signing the extension, the facility was reduced to US$162m. It
will amortise in steps over the remaining tenor and is scheduled to mature in October 2024. At 31
December 2022, US$117m was drawn under this facility, net of $7m of unamortised deferred
acquisition costs (2021: US$95m). Interest is payable on the drawn balance of the facility, and in
addition, utilisation fees are payable depending on the level of utilisation.
The Company has agreed to pay a certain proportion of losses incurred by the original lenders to
facilitate any transfer of their commitment under the facility to another lender. This has been
classified as an embedded derivative on initial recognition and remeasured at fair value through
profit or loss. The fair value of the embedded derivative as at 31 December 2022 was estimated at
US$22m (2021: US$4m) (Level 2 of the ‘fair value hierarchy’ contained within IFRS 13 ‘Fair Value
Measurement’).
Term loans
At 31 December 2022, the Company had in place two bilateral term loans with a combined (and
drawn) total of US$99m, net of US$1m of unamortised debt acquisition costs (2021: US$99m). On
signing the extension, the facilities were reduced to a total of US$90m (US$45m each), with both
facilities amortising in steps over the remaining tenor to October 2024.
Compliance with covenants
The financial covenants applicable for the period to 31 December 2022 were:
• Leverage financial covenant: shall not exceed a ratio of 4.5:1 throughout 2022; and
• Interest cover financial covenant: shall not be less than a ratio of 1.75:1 at 31 March 2022, if tested
at this date, 1.50:1 at 30 June 2022, 1.0:1 at 30 September 2022, if tested at this date and 1.75:1
thereafter.
The newly amended and extended RCF and term loans (together, the ‘Senior Loans’) are subject to
two financial covenants relating to minimum liquidity and minimum EBITDA. These replace the
financial covenants that were previously in place for periods up to and including 31 December 2022.
The financial covenants are as follows:
• Liquidity (excluding cash held in joint operations) shall exceed US$75m at each month end.
• EBITDA shall exceed a balance specified for each testing period, which for 2023 is the period
commencing on 1 January 2023 and ending on the relevant calendar quarter end and thereafter
is the 12 month period ending on the relevant calendar quarter end.
PETROFAC LIMITED | Annual report and accounts 2022256
The Company was compliant with its covenants throughout the period to 30 September 2022 and
received a waiver for the financial covenant testing date of 31 December 2022 as part of the
facilities amendment and extension noted above. As this waiver was received post year end, as part
of the amendment and extension in early 2023, the Senior Secured Notes were reclassified as
current loans and borrowings in the balance sheet at 31 December 2022.
Both the Senior Loans and the Senior Secured Notes are secured obligations of the Company and
will rank equally in right of payment with each other.
18 Financial assets and financial liabilities
2022
US$m
2021
US$m
Other financial assets
Non-current
Deferred consideration receivable from Ithaca Energy UK Ltd – 5
Restricted cash 6 56
6 61
Current
Deferred consideration receivable from Ithaca Energy UK Ltd – 49
Restricted cash 40 5
Derivative contracts on behalf of Group entities 3 –
Derivative contracts designated as cash flow hedges 1 –
Derivative contracts not designated as hedges 4 1
48 55
Other financial liabilities
Non-current
Lease liability 17 17
Current
Derivative contracts on behalf of Group entities 1 –
Derivative contracts not designated as hedges 12 5
Embedded derivative in respect of the revolving credit facility 22 4
Interest payable 10 8
45 17
Deferred consideration receivable from Ithaca Energy UK Ltd
The deferred consideration receivable from Ithaca Energy UK Ltd relating to the disposal of Petrofac
GSA Holdings Limited, was measured at amortised cost using a discount rate of 8.4%. During 2022,
the Company received US$12m of the deferred consideration from Ithaca Energy UK Ltd and also
sold the remaining receivable with a carrying value of US$43m, for US$40m. Upon sale of the
receivable, the Company recognised a loss of US$3m (note 3).
2022
US$m
2021
US$m
Opening balance (non-current and current) 54 48
Unwinding of discount (note 9) – 5
Expected credit loss reversal (note 6) 1 1
Loss on sale of receivable (note 3) (3) –
Receipts (52) –
As at the end of the reporting period – 54
Restricted cash
The Company had outstanding letters of guarantee, including performance, advance payments and
bid bonds on behalf of Group entities against which the Company had pledged or restricted cash
balances. These guarantees and bonds are all in relation to various customer contracts which
generate revenue for the Group and once the related conditions under these guarantees are
satisfied, any related cash collateral is released into cash balances.
Derivative contracts on behalf of Group entities
Included in other financial assets is US$3m (2021: US$nil) in respect of derivative contracts on
behalf of Group entities which relates to commodity swap contracts entered into by the Company
on behalf of Group entities. The Company has entered into a back-to-back agreement with the
Group entity and the liability on this contract of US$3m at 31 December 2022 (2021: US$nil) was
recognised as amounts due to Group entities.
Refer to note 9 for details on the embedded derivative in respect of the Revolving Credit Facility.
Fair value measurement
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that
is significant to the fair value measurement as a whole:
Level 1: Unadjusted quoted prices in active markets for identical financial assets or liabilities
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
257
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
PETROFAC LIMITED | Annual report and accounts 2022
Notes to the Company financial statements continued
For the year ended 31 December 2022
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
Set out below is a comparison of the carrying amounts and fair values of financial instruments as at
31 December:
Level
Carrying amount Fair value
2022
US$m
2021
US$m
2022
US$m
2021
US$m
Financial assets
Measured at amortised cost
Deferred consideration receivable from Ithaca Energy
UK Ltd Level 2 – 54 – 54
Measured at fair value through profit and loss
Derivative contracts on behalf of Group entities Level 2 3 – 3 –
Derivative contracts designated as cash flow hedges Level 2 1 – 1 –
Derivative contracts undesignated Level 2 4 1 4 1
Financial liabilities
Measured at amortised cost
Interest-bearing loans and borrowings
Senior secured notes Level 1 583 580 334 595
Term loans Level 2 99 99 99 99
Revolving credit facility Level 2 117 85 117 85
Interest payable Level 2 10 8 10 8
Measured at fair value through profit and loss
Derivative contracts on behalf of Group entities Level 2 1 – 1 –
Derivative contracts undesignated Level 2 12 5 12 5
Embedded derivative in respect of the revolving
credit facility Level 2 22 4 22 4
Management assessed the carrying amounts of trade and other receivables, amounts due from/due
to Group entities and trade and other payables to approximate their fair values and are therefore
excluded from the above table.
When the fair values of financial assets and financial liabilities recognised in the Company balance
sheet cannot be measured based on quoted prices in active markets, their fair value is measured
using valuation techniques including discounted cash flow models. The inputs to these models are
taken from observable markets where possible, but where such information is not available, a
degree of judgement is required in establishing fair values. Judgements include considerations of
inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these
factors could affect the recognised fair value of financial instruments and are discussed
furtherbelow.
The following methods and assumptions were used to estimate the fair values for material financial
instruments:
• The Company enters into derivative financial instruments with various counterparties, principally
financial institutions with investment grade credit ratings. Foreign exchange forward contracts and
commodity contracts are valued using valuation techniques, which employ the use of market
observable inputs. The most frequently applied valuation techniques include forward pricing using
present value calculations. The models incorporate various inputs including the credit quality of
counterparties, foreign exchange spot and forward rates, yieldcurves of the respective
currencies, currency basis spreads between the respective currencies, interest rate curves and
forward rate curves of the underlying commodity.
• The fair value of the embedded derivative in respect of the RCF is estimated using option pricing
models based on observable market yields on senior notes as the closest comparable debt
instruments issued by the Company.
• The fair values of long-term interest-bearing loans and borrowings (excluding senior secured
notes which are quoted on an active exchange) are equivalent to their amortised costs
determined as the present value of discounted future cash flows using the effective interest rate.
Changes in liabilities arising from financing activities
1 January
US$m
Cash
inflows
US$m
Cash
outflows
US$m
Other
(1)
US$m
31 December
US$m
Interest-bearing loans and borrowings 764 62 (36) 9 799
Amounts due to Group entities 489 614 (455) 101 749
Lease liabilities 17 – – – 17
At 31 December 2022 1,270 676 (491) 110 1,565
Interest-bearing loans and borrowings 755 1,484 (1,470) (5) 764
Amounts due to Group entities
(2)
356 419 (267) (19) 489
Lease liabilities – – – 17 17
At 31 December 2021 1,111 1,903 (1,737) (7) 1,270
(1) Represents the movement in debt acquisition costs for senior notes and other interest-bearing loans and borrowings. Others of US$101m
(2021: US$(19)m) in respect of amounts due to Group entities represents non-cash movements of US$132m in respect of loans payable
recognised on the purchase of a loan from a subsidiary (note 13), US$2m unpaid interest and US$22m net foreign exchange losses less
US$45m waiver of intercompany loan (note 7) and US$10m non-cash movement in amounts due to Group entities in relation to ECL charge
recognised in respect of guarantees provided to Group entities (2021: US$4m net foreign exchange losses less US$23m non-cash
movement in amounts due to Group entities in relation to ECL charges recognised on guarantees provided to Group entities).
(2) The prior year numbers are restated in respect of the presentation of movements related to amounts due to Group entities (note 2).
PETROFAC LIMITED | Annual report and accounts 2022258
19 Trade and other payables
2022
US$m
2021
US$m
Other payables and accruals 11 116
11 116
Other payables as at 31 December 2022 consist primarily of accruals for corporate overheads of
US$7m (2021: UK Serious Fraud Office penalty of US$104m).
20 Leases
A right-of-use asset and a corresponding lease liability were recognised in the prior year in respect
of the West Desaru mobile offshore production unit (MOPU) for which a put option on the Company
exists (note 12).
a. Right-of-use asset
The Company recognises right-of-use assets, within the property, plant and equipment line item of
the balance sheet, at the commencement date of the lease (the date at which the underlying asset
is available for use). The carrying amount of the right-of-use asset recognised and the movement
during the year is disclosed in note 12.
b. Lease liability
The table below provides details of a lease liability recognised within the other financial liabilities line
item of the balance sheet:
2022
US$m
2021
US$m
Lease liability at 1 January 17 –
Additions – 16
Interest – 1
At 31 December 17 17
c. Amounts recognised in the income statement in respect of lease
2022
US$m
2021
US$m
Finance expense recognised associated with lease liability – 1
d. Future lease payments
The outstanding lease liability of US$20m is due to be repaid in full on 30 September 2026. The
discounted minimum lease payments are US$17m as at 31 December 2022 (2021: US$17m).
21 Commitments and contingent liabilities
Commitments
In the normal course of business, Group entities will obtain surety bonds, letters of credit and
guarantees, which are contractually required to secure performance, advance payment or in lieu of
retentions being withheld. Some of these facilities are secured by issue of corporate guarantees on
behalf of Group entities by the Company in favour of the issuing banks.
At 31 December 2022, the Company had outstanding letters of guarantee, including performance
and advance payments of US$651m (2021: US$673m) on behalf of Group entities against which the
Company had pledged or had restricted cash balances of US$46m (2021: US$61m).
At 31 December 2022, the Company had outstanding forward exchange contracts amounting to
US$667m (2021: US$849m). These commitments consist of future obligations either to acquire or to
sell designated amounts of foreign currency at agreed rates and value dates. The Company also
had commodity swap contracts in respect of 693,000 barrels of crude oil as at 31 December 2022
(2021: nil). All of these contracts have back-to-back contracts with the Group entity on behalf of
whom the external derivative contract was entered into by the Company.
22 Risk management and financial instruments
Risk management objectives and policies
The Company’s principal financial assets and liabilities are amounts due from and due to Group
entities, forward currency contracts, cash and short-term deposits and interest-bearing loans
andborrowings.
The Company’s activities expose it to various financial risks particularly associated with interest rate
risks on its external variable rate loans and borrowings. The Company has a policy not to enter
speculative trading of financial derivatives.
The other main risks besides interest rate are foreign currency risk, credit risk and liquidity risk; the
policies relating to these risks are discussed in detail below:
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect the value of the
Company’s interest-bearing financial liabilities and assets.
The Company’s variable interest-bearing loans and borrowings are primarily denominated in United
States dollars and the associated interest rate is linked to United States dollar LIBOR (London Interbank
Offered Rate). The Company uses derivatives to fix the underlying floating interest rates. At 31 December
2022, the proportion of floating rate debt was 27% of the total financial debt outstanding (2021: 24%).
259
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
PETROFAC LIMITED | Annual report and accounts 2022
Notes to the Company financial statements continued
For the year ended 31 December 2022
Interest rate sensitivity analysis
The impact on the Company’s before tax profit and equity due to a reasonably possible change in
interest rates is demonstrated in the table below.
The analysis assumes that all other variables remain constant.
Before tax profit Equity
100 basis point
increase
US$m
100 basis point
decrease
US$m
100 basis point
increase
US$m
100 basis point
decrease
US$m
31 December 2022 (9) 9 – –
31 December 2021 (11) 11 – –
Foreign currency risk
The Company is exposed to foreign currency risk on translation of assets and liabilities that are in a
currency other than the United States dollar reporting currency of the Company.
The Company uses forward currency contracts to manage the foreign currency exposure on all
amounts due from and due to Groupentities.
The Company is only exposed to foreign currency exposure relating to cash and bank balances, an
amount of £1m (2021: £12m) payable to a subsidiary and the term loan for AED185m (2021:
AED185m) at the end of the reporting period.
The following table summarises the impact on the Company’s profit before tax and equity (due to
change in the fair value of monetary assets and liabilities) of a reasonably possible change in US
dollar exchange rates with respect to different currencies:
Profit before tax Equity
+10% US dollar
rate increase
US$m
(1)
–10% US dollar
rate decrease
US$m
(1)
+10% US dollar
rate increase
US$m
–10% US dollar
rate decrease
US$m
31 December 2022 (72) 72 – –
31 December 2021 (68) 68 – –
(1) Includes impact on pegged currencies mainly relating to interest-bearing loans and borrowings denominated in Arab Emirates dirham.
At 31 December 2022, the Company had foreign exchange forward contracts as follows:
Contract value Fair value
2022
US$m
2021
US$m
2022
US$m
2021
US$m
Euro (sales)/purchases (42) (45) – –
Sterling sales 275 (224) (9) (4)
Kuwaiti dinar sales 218 (254) – –
Arab Emirates dirham purchases (50) 50 – –
Others 7 (6) – –
n/a n/a (9) (4)
The above foreign exchange contracts mature and will affect income between January 2023 and
November 2023 (2021: between January 2022 and November 2023).
Credit risk
The Company’s principal financial assets are cash and short-term deposits and amounts due from
Group entities.
The Company manages its credit risk in relation to cash and short-term deposits by only depositing
cash with financial institutions that have high credit ratings provided by international credit
ratingagencies.
Liquidity risk
The Company’s objective is to maintain a balance between continuity of funding and flexibility
through the use of revolving credit facility and term loans, to reduce its exposure to liquidity risk.
The maturity profiles of the Company’s financial liabilities, based on their original contractual
maturities at 31 December 2022 are shown opposite:
PETROFAC LIMITED | Annual report and accounts 2022260
Year ended 31 December 2022
6 months
or less
US$m
6 – 12
months
US$m
1 – 2
years
US$m
2 – 5
years
US$m
More
than
5 years
US$m
Contractual
undiscounted
cash flows
US$m
Carrying
amount
US$m
Financial liabilities
Interest-bearing loans and
borrowings – 224 – 600 – 824 799
Trade and other payables 11 – – – – 11 11
Amounts due to Group entities 753 – – – – 753 753
Derivative instruments 13 – – – – 13 13
Embedded derivative in
respect of the revolving
credit facility – 22 – – – 22 22
Lease liability – – – 20 – 20 17
Interest payments 43 37 59 117 – 256 n/a
820 283 59 737 – 1,899 1,615
Year ended 31 December 2021
6 months
or less
US$m
6 – 12
months
US$m
1 – 2
years
US$m
2 – 5
years
US$m
More than
5 years
US$m
Contractual
undiscounted
cash flows
US$m
Carrying
amount
US$m
Financial liabilities
Interest-bearing loans and
borrowings – – 195 600 – 795 764
Trade and other payables 116 – – – – 116 116
Amounts due to Group entities 507 – – – – 507 507
Derivative instruments 5 – – – – 5 5
Embedded derivative in
respect of the revolving
credit facility 4 – – – – 4 4
Lease liability – – – 20 – 20 17
Interest payments 34 34 66 175 – 309 n/a
666 34 261 795 – 1,756 1,413
The Company uses various funded facilities provided by banks and its own financial assets to fund
the above-mentioned financial liabilities.
Commodity price risk – oil prices
The Company has placed commodity derivative contracts on behalf of Group entities and entered
into back-to-back agreements with the respective Group entities. Therefore, the Company income
statement is not exposed to the impact of changes in oil and gas prices. Refer to note 33 in the
Group’s consolidated financial statements.
Capital management
The Company’s policy is to maintain a robust capital base using a combination of external and
internal financing to support its activities as the holding company for the Group.
The Company’s gearing ratio is as follows:
2022
US$m
2021
(restated)
US$m
Cash and short-term deposits (note 14) 99 135
Interest-bearing loans and borrowings (A) (note 17) (799) (764)
Net debt (B) (700) (629)
Total equity (C) 507 474
Gross gearing ratio (A/C) 158% 161%
Net gearing ratio (B/C) 138% 133%
23 Related party transactions
The Company’s related parties consist of the Group entities, and the transactions and amounts due
to/due from them are either of funding or investing nature. The Company recharged share-based
payment costs of US$6m (2021: US$7m) to the Group entities inrelation to the Group’s share-based
payment plans for the Group’s employees. In addition, the Company also obtained letters of
guarantees on behalf of the Group entities and the cost of US$4m (2021: US$6m) incurred on such
guarantees was recharged by theCompany to the Group entities. The Company also received
dividends from its subsidiaries and associates of US$60m (2021: US$128m), see note 4.
The remuneration paid by the Company to its Non-executive Directors was US$1m (2021: US$1m).
The Company was also recharged a portion of the key management personnel cost by one of its
subsidiaries. The amount recharged during the year was US$17m (2021: US$14m), of which key
management personnel cost was US$2m (2021: US$2m). For further details of the full amount of
key management personnel costs, refer to note 31 of the Group’s consolidated financial statements.
261
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
PETROFAC LIMITED | Annual report and accounts 2022
Notes to the Company financial statements continued
For the year ended 31 December 2022
24 Share capital and related reserves
The share capital of the Company as at 31 December was as follows:
Number of
shares
Share capital
US$m
Share premium
US$m
Capital
redemption
reserve
US$m
At 1 January 2021 345,912,747 7 4 11
Issue of shares from capital raise 173,906,085 3 247 –
At 31 December 2021 519,818,832 10 251 11
Issue of shares to Employee Benefit Trust 1,338,610 – – –
At 31 December 2022 521,157,4 42 10 251 11
Number of shares refers to US$0.02 ordinary shares, which are issued and fully paid. In total, there
are 750,000,000 ordinary shares of US$0.02 that are authorised.
All the allotted and issued shares, including those held by the Employee Benefit Trust, were fully
paid. The share capital comprises only one class of ordinary shares. The ordinary shares carry a
voting right and the right to a dividend.
In the prior year, the Company issued 173,597,412 ordinary shares, includinga Firm Placing of
87,119,226 ordinary shares and a Placing and Open Offer of 86,478,186 ordinary shares. All of the
above shares were issued at £1.15 per share, generating gross proceeds of approximately £200m
(US$268m) before issue and associated costs of US$18m. Concurrently with the capital raise, the
Directors (other than Mr Asfari) subscribed for 308,673 additional shares at the issue price of £1.15.
This resulted in a total number of new shares of 173,906,085 that were admitted to the premium
listing segment of the Official List of the FCA and to trading on the main market for listed securities
of the London Stock Exchange on 15 November 2021.
All shares issued in 2021 by way of the capital raise were each issued, fully paid and rank pari passu
in all respects with each other and the ordinary shares of the Company in issue prior to the capital
raise, including the right to receive all dividends and other distributions declared, made or paid after
the date of issue.
During 2022, the Company issued 1,338,610 shares to the Employee Benefit Trust, with a nominal
value of $0.02.
Share premium: The balance on the share premium account represents the amount received in
excess of the nominal value of the ordinary shares adjusted for associated issuance costs.
Capital redemption reserve: The balance on the capital redemption reserve represents the
aggregated nominal value of the ordinary shares repurchased and cancelled.
PETROFAC LIMITED | Annual report and accounts 2022262
A
ADNOC The Abu Dhabi National Oil Company is the state-owned
oil company of the United Arab Emirates
APM Alternative performance measure
Appraisal well A well drilled into a discovered accumulation to
provide data necessary to define a Field Development Plan for
the accumulation
AS Asset Solutions
B
Backlog consists of the estimated revenue attributable to the
uncompleted portion of fixed-price engineering, procurement
and construction contracts and variation orders plus, with regard
to engineering, operations, maintenance and IES contracts, the
estimated revenue attributable to the lesser of the remaining term
of the contract and five years. The Group uses this key
performance indicator as a measure ofthevisibility of future
earnings. Backlog is not an auditedmeasure.
BAME Black, Asian and minority ethnic
Barrel A unit of volume measurement used for petroleum
bbl One barrel of oil
BEIS The Department for Business, Energy and Industrial
Strategy, which is a department of the United Kingdom
Government
Bio-CCS Bioenergy Carbon Capture and Storage
Block A subdivision of an underground petroleum reservoir, by a
resource owner, for the purposes of licensing and administering
exploration, appraisal and production of resources, by oil and
gascompanies
boe Barrel of oil equivalent
bpd Barrel per day
Brownfield development Further investment in a mature field,
to enhance its production capacity, thereby increasing recovery
and extending field life
C
CAGR Compound annual growth rate
Capex Capital expenditure
Carbon capture The process of capturing waste carbondioxide
CCUS Carbon capture, usage and storage
CDP Carbon Disclosure Project
CGU Cash-generating unit
CIS Commonwealth of Independent States
CO
2
Carbon dioxide
Condensate The liquid produced by the condensation of steam
or any other gas
COP27 The 2022 United Nations Climate Change Conference.
This was the 27th UN Climate Change conference held in Egypt
from 6-18 November 2022.
Cost plus KPIs A reimbursable contract which includes an
incentive income linked to the successful delivery of key
performance indicators.
D
DBP Deferred Bonus Plan
Decommissioning The re-use, recycling and disposal of
redundant oil and gas facilities
Downstream The refining of petroleum crude oil and the
processing and purifying of raw natural gas, as well as the
marketing and distribution of products derived from crude oil and
natural gas
Duty Holder A contracting model under which Petrofac provides
a complete managed service, covering production and
maintenance work, both offshore and onshore, to reduce the
costs of operating and to extend the life of the facilities
E
EBIT Earnings before interest, taxation and amortisation
EBITDA Calculated as profit before tax and net finance costs
and income, but after our share of profits/losses from associates
and joint ventures (as per the consolidated income statement),
adjusted to add back charges for depreciation and amortisation
(as per note 4 to the consolidated financial statements)
EBT Employee Benefit Trust
ECL Expected credit loss
E&C Engineering & Construction
EPC Engineering, Procurement and Construction
EPCC Engineering, Procurement, Construction and
Commissioning
EPCI Engineering, Procurement, Construction and Installation
EPCIC Engineering, Procurement, Construction, Installation and
Commissioning
EPS Earnings per share
ESG Environmental, Social and Governance
ETR Effective Tax Rate
F
FCA Financial Conduct Authority
FCPA Foreign Corrupt Practices Act
FEED Front-End Engineering and Design
Fixed-price turnkey project An agreement in which a
contractor designs, constructs, and manages a project until it is
ready to be handed overto the customer and operation
canbegin immediately
FPF Floating Production Facility
FPSO Floating Production, Storage and Offloading vessel
FRC Financial Reporting Council
G
Gas field A field containing natural gas but no oil
GHG Greenhouse gas
Greenfield development Development of a new field
Glossary
PETROFAC LIMITED | Annual Report & Accounts 2022
263
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
H
HSE Health & Safety Executive (UK)
HVAC High-voltage alternating current
HVDC High-voltage direct current
Hydrocarbon A compound containing only the elements
hydrogen and carbon – can be solid, liquid or gas
I
IAS International Accounting Standards
IASB International Accounting Standards Board
ICV In-country value
IEA International Energy Agency
IES Integrated Energy Services. The IES division harnesses
Petrofac’s existing service capabilities and delivers them on an
integrated basis to resource holders with the aim of supporting
the development of their oil and gas resources.
IFRS International Financial Reporting Standards
IFRIC IFRS Interpretations Committee
IOC International oil company
J
Just transition Moving to a more sustainable economy in a way
that is fair to everyone
K
KPI Key performance indicator
L
LNG Liquefied natural gas
LPG Liquefied petroleum gas
LTI Lost time injury
M
mboe Million barrels of oil equivalents
MENA Middle East and North Africa region
MMscfd Million standard cubic feet per day
MOPU Mobile offshore production unit
MOU Memorandum of understanding
N
Net Zero The balance between the amount of greenhouse gas
emissions that are produced and the amount that are removed
from the atmosphere
New Energies Area focusing on opportunities presented by the
energy transition
NGO Non-governmental organisation
NOC National oil company
O
OECD Organisation for Economic Co-operation and
Development
Oil field A geographic area under which an oil reservoir lies
OPEC Organisation of Petroleum Exporting Countries
P
Paris Agreement A legal binding international treaty on climate
change, which was adopted by196 parties at COP 21 in Paris in
2015. Its goal is to limit global warming to below 2, preferably
to1.5 degrees celsius, compared with pre-industrial levels.
PEC Production Enhancement Contract is where Petrofac is paid
a tariff per barrel for oil and gas production and therefore has no
commodity price exposure
PMC Project Management Contractor
PSC Production Sharing Contract
PSP Performance Share Plan
R
RCF Revolving credit facility
Reimbursable services Where the cost of Petrofac’s services
are reimbursed by the customer plus an agreed margin
RI Recordable injury
ROCE Return on capital employed
RSP Restricted Share Plan
S
SaaS Software as a Service
SDI Separately disclosed items
SFO Serious Fraud Office
SIP Share Incentive Plan
SMEs Small and medium-sized enterprises
SPA Sale and purchase agreement
T
TCFD Task Force on Climate-related Financial Disclosures
TCO
2
e Tonnes of carbon emissions
Technology neutral Being able to define the best technological
solutions for clients’ projects from a wide range of suppliers and
partners
TSR Total shareholder return
U
UKCS United Kingdom Continental Shelf
UNGC United Nations Global Compact
Upstream The segment of the petroleum industry relating to
exploration, development and production of oil and gas
resources
W
W2V Waste-to-value
Glossary continued
PETROFAC LIMITED | Annual Report & Accounts 2022
264
Registrar Auditors
Equiniti (Jersey) Limited Ernst & Young LLP
26 New Street 1 More London Place
St Helier London
Jersey JE2 3RA SE1 2AF
Corporate brokers
Goldman Sachs JP Morgan Cazenove
Peterborough Court 25 Bank Street
133 Fleet Street Canary Wharf
London EC4A 2BB London E14 5JP
Legal advisors to the Company
Linklaters LLP Carey Olsen Jersey LLP
One Silk Street 47 Esplanade
London EC2Y 8HQ St Helier, Jersey JE1 0BD
Corporate and financial PR
Teneo
85 Fleet Street
London EC4Y 1AE
Company Secretary and Registered Office
Ocorian Secretaries (Jersey) Limited
26 New Street
St Helier
Jersey JE2 3RA
Stock Exchange listing
Petrofac shares are listed on the London Stock Exchange usingcode ‘PFC.L’.
Annual General Meeting
23 June 2023
Announcements
Copies of all announcements are available on the Company’s website at petrofac.com following
release.
Shareholder warning
Shareholders should be very wary of any unsolicited advice, offers to buy shares at a discount or
offers of free company reports on the Company. Fraudsters use persuasive and high-pressure
tactics to lure investors into scams and they may offer to sell shares that often turn out to be
worthless, overpriced or even non-existent. Whilst high returns are promised, those who invest
usually end up losing their money.
Please keep in mind that firms authorised by the Financial Conduct Authority (FCA) are unlikely to
contact you out of the blue. If you receive any unsolicited investment advice:
• Make sure you get the correct name of the person and organisation and make a record of any
other information they give you, e.g. telephone number, address, and ask for their ‘firm reference
number’ (FRN)
• Check that they are properly authorised by the FCA before getting involved. You can check the
FCA register at https://register.fca.org.uk or call +44800 111 6768
• Report approaches to the FCA – a list of unauthorised overseas firms who are targeting, or have
targeted, UK investors is maintained. Reporting such organisations means the list can be kept up
to date and appropriate action be considered
• Inform Equiniti (Jersey) Limited, our Registrars. They are not able to investigate such incidents
themselves, but will record the details and pass them on to the Company and liaise with the FCA
on your behalf
• Consider that if you deal with an unauthorised firm, you would not be eligible to receive payment
under the Financial Services Compensation Scheme
If you suspect you have been approached by fraudsters, please contact the FCA using the share
fraud reporting form at fca.org.uk/scams.
You can also call the FCA Helpline on:
0800 111 6768 (UK freephone) or 0300 500 8082 (UK), or
+44 207 066 1000 (outside UK)
If you have already paid money to share fraudsters, you should contact ActionFraud on
0300 123 2040 or online at actionfraud.police.uk.
PETROFAC LIMITED | Annual Report & Accounts 2022
265
GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEW
Shareholder information as at May 2023